The Board of Mediterranean Oil & Gas Plc , the central Mediterranean focused producer, developer and explorer of oil and gas assets, announced today that Phoenicia Energy Company Limited (“PEL”), a wholly owned subsidiary of MOG, has entered into an Execution Agreement (“Execution Agreement”) with Dominion Petroleum Limited (“Dominion”) to farm-out a 75% operated working interest in the production sharing contract for Blocks 4, 5, 6 and 7 of Area 4 Offshore Malta (“Maltese PSC”), pursuant to a draft farm-in agreement (the “Maltese Acquisition”). Completion of the Maltese Acquisition is conditional upon (i) receipt of required Maltese government approvals and (ii) completion of the placing of shares by Dominion, announced on 24 June, 2011 (“Dominion Placing”).
Under the Execution Agreement, Dominion will pay a deposit of US$225,000 to PEL, which is non-refundable in the event that the Dominion Placing does not complete, or Dominion is otherwise unable to enter into the farm-in agreement. Should the Maltese government approvals not be received, the deposit is refundable in its entirety.
The Maltese PSC is situated to the north of Libya, covering an area of 5,715 km2 in Maltese waters. It includes both the Cretaceous rift potential of the Melita-Median Graben and the confirmed Eocene carbonate play of North Africa. A competent person‟s report on Area 4, completed by RPS Energy and prepared for MOG in March 2006, identified a number of prospects within the area. Of particular interest is the Tarxien prospect, a lower Eocene carbonate build up. Using Libyan oil field analogues, RPS estimated the prospect to have a gross recoverable un-risked P50 prospective oil resource of 115mmbbl with an 18% chance of success.
Under the Maltese PSC, MOG currently holds a 90% operated working interest through its subsidiary PEL, with Leni Gas & Oil Investments Limited holding the remaining 10% of working interest. Following the completion of the Maltese Acquisition and the subsequent farm-in agreement, Dominion will hold a 75% operated working interest in the Maltese PSC. Under the terms of the farm-in agreement, Dominion will meet certain exploration costs up to a cap of US$1,260,000, on behalf of MOG in relation to its remaining 15% working interest. Dominion will also compensate MOG for a total amount of US$900,000 in certain historic costs, through the US$225,000 deposit mentioned above and a closing sum of US$675,000 under the farm-in agreement.
The work obligations of the current period of the Maltese PSC comprise the acquisition of 1,000km2 of 3D seismic data and the drilling of one exploration well. The results of the seismic survey will enable the JV partners to define and evaluate the Tarxien prospect and other identified opportunities within Area 4, prior to any drilling decision. The long-offset 3D will also allow for a clearer analysis of the pre-tertiary rift-fill below the Eocene carbonates and potential Cretaceous targets.
The first exploration period runs until January 2013 and there is a minimum spend requirement of US$5 million. The Company anticipates that the 3D seismic survey will cost between approximately US$8 million and US$10 million gross to undertake, which will satisfy the minimum spend requirement.
Michael Bonte Friedheim, the Company‟s CEO, stated:
“Following agreement with the Government of Malta to extend the exploration phase for all blocks of Area 4, for 18 months, we are very pleased to have concluded the terms for a farm out with Dominion.
While this remains conditional, the farm out agreement allows us to be practically free-carried for the completion of a 1,000 sq km long-offset 3D seismic survey, as well as receive a significant reimbursement of back costs. Dominion has extensive experience in frontier exploration activities and we are glad to have them as a partner.
We are hopeful that the seismic survey will identify further prospects in the area and make the drilling of an exploration well attractive. ”
Source: MOG, June 24, 2011;