GulfSlope Energy and Texas South Energy have executed an exclusive letter of intent (LOI) with a ‘large international oil and gas company’ to jointly drill and develop their oil and gas prospects located in the U.S. Gulf of Mexico.
The principal commercial terms of the farm-out include commitment by an unnamed partner to drill a minimum of three exploratory wells with the option to participate in additional three-well phases on the same basis, GulfSlope informed on Wednesday.
The partner will earn a 75% working interest in each prospect by paying 90% of the exploratory costs and making a cash payment of $1.5 million to be split between GulfSlope and Texas South (the farmors) on a 73%/27% basis.
GulfSlope also said it will be the initial operator of record and will retain a 20% working interest for the subsalt prospects included in the first phase while Texas South will retain a 5% working interested for the subsalt prospects included in the first phase. The partner and farmors will agree to an area of mutual interest.
Upon achieving certain milestones, the partner will have the right to purchase up to 20% of the common stock in each of the farmors; and provision for exclusive negotiations between the partner and farmors that expires October 31, 2017, or such later time as they mutually agree.
John N. Seitz, Chairman and CEO of GulfSlope stated, “We and Texas South are looking forward to working with our new partner, who is a highly accomplished oil and gas company with a great track record of finding and developing substantial oil and gas resources in offshore areas. Their technical capabilities have enabled them to recognize a unique opportunity, one where the seismic and drilling technologies have converged with today’s lower costs of drilling with jack-up rigs and development of large scale reserve targets with fixed platforms in shallow water.”
The purpose of the LOI is to facilitate further discussions between the parties on an exclusive basis. The LOI is subject to a number of conditions and it is not binding.