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Monday, January 23, 2017
Pura Vida Energy entered into a conditional term sheet with a rig contractor to fund the costs of a three well, back to back drilling program on the Nkembe Block, which will include an appraisal of the Loba oil field and a planned production test.
The term sheet calls for the rig contractor to provide a jack-up rig and fund the costs of the rig for the three-well program anticipated to commence in H2 2017, including the mobilization costs and operating day rate of the rig, in exchange for a royalty out of production from any fields discovered during the drilling campaign that are brought into production. Pura Vida will maintain its 100% ownership interest in the Nkembe permit, subject to the terms of the participation option described below.
The costs to be funded by the rig contractor are approximately $20 million. The transaction is conditional on Pura Vida securing funding for the balance of the drilling costs for the three-well drilling program from a project partner (estimated to be an additional $20 million) and obtaining all required regulatory approvals. Pura Vida has commenced discussions with potential partners to secure the remaining funding required and meetings with the regulator concerning the approvals are being scheduled.
The value of the royalty payable to the rig contractor under the Term Sheet varies depending on the size and production rates of the relevant field(s) discovered during the 2017 Drilling Campaign.
The first well in the 2017 drilling campaign will target the Loba discovery and Loba Deep prospect, which includes a planned DST of the Loba discovery. The location of the second and third wells will be determined by Pura Vida, based on results, and may include prospects such as Loba East, Lepidote Deep, Pompano, and Palomite Deep. The campaign will target approximately 100 million barrels of oil, of which 12 million barrels are considered low risk appraisal testing of contingent (discovered) resources.
As part of the transaction, the formal documentation will grant an option to the rig contractor to subscribe for up to 10% of Pura Vida’s issued capital on terms to be agreed. The term sheet provides for the rig contractor to convert the royalty interest over any particular field into direct equity in that field prior to a FID to develop the field based on a valuation methodology to be contained in the formal documentation.
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