Valeura Energy Inc. is pleased to announce that its wholly-owned affiliate, Corporate Resources B.V. has executed the definitive transaction documents with Statoil Holding Netherlands B.V., a wholly-owned affiliate of Statoil ASA, for a farm-in agreement for the exploration of the deeper formations on Valeura's two 100% owned and operated Banarli exploration licences in the Thrace Basin of northwest Turkey. The Definitive Agreements include a farm-in agreement, a joint operating agreement to apply post-earning and a number of ancillary oil & gas agreements.
"Completion of the Definitive Agreements is a key milestone and we now look forward to obtaining the necessary Turkish government approvals to close the farm-in transaction," said Jim McFarland, President and Chief Executive Officer of Valeura. "Valeura and Statoil have worked diligently to negotiate the Definitive Agreements and in parallel have collaborated to advance the preparatory work to expeditiously launch the farm-in work program, to be operated by Valeura, pending receipt of Turkish government approvals," adds McFarland.
Under the terms of the Definitive Agreements, Statoil has the option to earn a 50% participating interest in the deep formations on the Banarli licences by investing in an exploration program that includes payments and carried costs of at least US$36 million. The actual amount invested by Statoil to earn its 50% interest may be higher based on the actual agreed costs of the three-phase work program to satisfy the commitments as described more fully in Valeura's May 15, 2016 press release. The earning work program includes two deep exploration wells and additional 3D seismic.
The next step in the transaction requires the parties to jointly submit applications to the General Directorate of Petroleum Affairs ("GDPA") of the Republic of Turkey for approval of the associated licence interest transfers whereby Statoil would hold a 50% participating interest in the deep formations below approximately 2,500 metres and Valeura would retain a 100% interest in the shallow formations on the Banarli Licences. These applications are expected to be submitted by the end of August 2016. GDPA approval of the licence interest transfers is a key condition to close the transaction and Valeura will receive US$6.0 million at closing as a contribution to past exploration costs incurred on the Banarli Licences.
In the meantime, preparatory work has continued to position the possible commencement of drilling by year-end 2016 or early 2017, contingent on the timing of government approvals to close the transaction.
OTHER BUSINESS DEVELOPMENT AND OPERATIONAL HIGHLIGHTS
The Statoil farm-in on the Banarli Licences has set the stage for the Corporation to more actively pursue a joint venture partner to explore the deeper horizons below approximately 2,500 metres on certain joint venture lands acquired from Thrace Basin Natural Gas (Turkiye) Corporation and Pinnacle Turkey Inc., which also have potential for a potential basin-centered gas play.
In concert, the Corporation is actively pursuing strategic acquisitions and exploring its options to ramp-up exploration and development activities in the shallow formations on its 40% non-operated interest in the TBNG JV. A resumption of activity on the TBNG JV would expand the drilling and fracing opportunity portfolio, balance risk and complement the 100% controlled shallow program on the Banarli Licences, which is in the early exploration phase. The objective of this strategy is to grow a more robust premium-priced, high netback conventional shallow gas and unconventional tight gas business in Turkey, while retaining meaningful exposure to a potentially high impact, deep basin-centered gas play in the Thrace Basin funded in the early stages by joint venture partners.
Bati Gurgen-2 Well
The Bati Gurgen-2 sidetrack well on the Banarli Licences has now been completed as a natural gas producer from the Osmancik formation and is in the process of being tied-in with a very short flowline to the existing gathering system from the Bati Gurgen-1 well. The well is expected to be on-stream by early September 2016. Approximately 8.0 metres of conventional stacked sands were perforated in the Osmancik below a true vertical depth of 1,640 metres. A short 12-hour well test was carried out at a restricted rate of approximately 1.0 million cubic feet per day ("MMcf/d"). The gas will be sold to the TNBG JV under the same sales contract currently in place for Banarli sales sourced from the Bati Gurgen-1 well.