G2 Energy has entered into an option agreement with NU-Oil and Gas (NUOG) for an exclusive option to earn 100 percent of NUOG’s working interest in the deep rights of the EL1070 license offshore Western Newfoundland.
Deep rights on EL1070 are defined as all petroleum substances and associated rights within and stratigraphically below the Ordovician Carbonate Platform (excluding Cape Cormorant and Table Cove Formations).
The main target within the deep rights is the Shoal Point prospect, which is a ‘conventional’ exploration target and is reachable from an onshore location.
NUOG said on Wednesday that the rights are currently held by the company’s Canadian subsidiary, Enegi Oil Inc. (EOI). Should the 24-month option be exercised, EOI will own 5 percent of any revenue generated from the development of EL1070.
Although EOI is a registered holder of 33 percent of the license through a 2009 agreement with Shoal Point Energy, the company now holds a 100 percent interest in the Deep Rights, with Shoal Point Energy holding 100 percent interest in the Shallow Rights on the license.
To execute the option, G2 Energy must submit an application for a Significant Discovery License (SDL) for the license before the expiration of the option period. That means that G2 Energy must achieve a flow test for hydrocarbons on one or more of the wells on EL1070 before the end of the option period which is a requirement under regulations for the submission of an application for an SDL.
The company said that G2 Energy did further analysis of data on existing wells and had identified a bypassed oil pay zone behind the casing in one of the license wells within the Carbonate Platform section. The initial work program, subject to regulatory approval, will plan to flow test this prospective zone. This section is interpreted to have a dense natural fracture network in brittle carbonate rocks, which may have natural flow capability.
All exploration costs or abandonment costs associated work performed by G2 Energy during the option period will be paid by G2 Energy and the company now has a period of 45 days to conclude due diligence for the license rights.
Nigel Burton, CEO of NU-Oil, said: “The directors are pleased that we can enter into an agreement that should allow new investment into EL1070. The agreement has the added benefit of removing on-going costs. We look forward to working with G2 Energy.”
EL1070 was issued in January 2002 and continues to be in good standing beyond its 9-year exploration phase. To pursue Shallow Rights hydrocarbons in the Green Point shale fracking will be necessary, for which there is currently a moratorium in Newfoundland.
NUOG, in conjunction with G2 Energy, will also need to liaise with the government to begin activities on the conventional Shoal Point prospect for which G2 Energy has already conducted informal discussions with the regulator.