Sterling Energy announce additional farmin to Odewayne Block (Republic of Somaliland)
Sterling Energy Plc, the AIM listed independent oil & gas exploration and production company (AIM: SEY), is pleased to announce that it has signed a second Farmout Agreement (“Farmout Agreement”) with Jacka Resources Somaliland Limited (“Jacka”) to acquire an additional 15% interest in the Production Sharing Contract for the Odewayne Block (the “PSC”), located onshore in the Republic of Somaliland.
Sterling Energy Plc currently holds a 25% participating interest in the PSC via a wholly owned subsidiary, Sterling Energy (East Africa) Limited (“Sterling”) and post completion of the Farmout Agreement will hold a 40% participating interest in the PSC.
Sterling acquired its current 25% participating interest through the farmin for a 10% participating interest with Petrosoma Limited (the “Petrosoma Transaction”) and the farmin for a 15% participating interest with Jacka Resources Somaliland Limited (the “Original Jacka Transaction”).
Under the terms of the Farmout Agreement:
a) Sterling will assume an additional 15% interest in the PSC from Jacka, effective on completion;
b) Sterling will pay Jacka US$2.4 million on signature of the Farmout Agreement and US$9.6 million on completion of the Farmout Agreement;
c) Jacka will cancel the US$12 million future conditional payments due under the Original Jacka Transaction;
d) Sterling will be carried by Genel for the costs of all exploration activities during the Third Period and the Fourth Period of the PSC; and
e) the purchase of the additional 15% participating interest in the PSC is subject to receiving the approval of the Government of Somaliland.
The PSC covers block SL6 and part of blocks SL7 and SL10, onshore Somaliland, comprising an area of 22,840 square kilometres. The PSC, awarded in 2005, is in the Third Period (expiring November 2014) with an outstanding minimum work obligation of 500 km of 2D seismic. The minimum work obligation during the Fourth Period of the PSC (expiring May 2016) is for 1,000 km of 2D seismic and one exploration well.
During 2013 an aero-magnetic and gravity survey confirmed the geometry of a broad basin over the Odewayne block believed to be of Jurassic to Cretaceous origin, analogous to productive basins in Yemen. Fieldwork in the block has highlighted the presence of numerous seeps giving encouragement that a working hydrocarbon system is present in this undrilled basin. The forward work program includes acquisition of an extensive 2D seismic programme to define drillable targets.
Operations in Somaliland have been delayed by security concerns and the operator, on behalf of the joint venture partners, is working with the Ministry of Energy and Minerals to resume operations as soon as practicable.
Jacka Resources Somaliland Limited is a subsidiary of Jacka Resources Limited (ASX: JKA). Jacka Resources Limited is an oil and gas exploration and company with interests in Tunisia, Nigeria and Tanzania.
Genel Energy Somaliland Limited (50% and Operator) is a subsidiary of Genel Energy Plc (LSE: GENL) and Petrosoma Limited (10%) is a privately owned company.
Sterling Energy Plc.’s Chairman, Alastair Beardsall, said:
“We are very pleased to have entered into the second Farmout Agreement with Jacka for the Odewayne Block in Somaliland. On completion we will have built a material stake of 40% in the PSC and lowered our proportionate cost of entry. We consider the Odewayne Block to be highly prospective and look forward to working with our joint venture partners in the exploration of this largely unexplored block.”