ExxonMobil Exploration Co. Ltd. will become operator of an unconventional oil and gas exploration and development program in Colombia’s Middle Magdalena basin.
Subject to approval by Colombia’s ANH, ExxonMobil will take a farmout from Patriot Energy Oil & Gas Inc., a subsidiary of Sintana Energy Inc., Toronto, to earn a 70% interest in the 43,000-acre VMM-37 block.
ExxonMobil will earn the 70% interest by completing a work program in the Cretaceous La Luna and deeper formations by drilling three exploratory wells at its sole expense. The first well is to spud in the third quarter of 2013. ExxonMobil will also compensate Sintana for its past expenses on the block.
Patriot will retain its 30% interest in the unconventional play as well as its current 100% participation interest in the conventional resources overlying the unconventional interval.
ExxonMobil will have an option to proceed to a development phase in which it will pay 100% of all additional costs to a maximum of $45 million, of which it will recoup $10 million from 50% of Patriot’s production proceeds.
Patriot and ExxonMobil have agreed to make good faith efforts to locate exploratory wells that target the unconventional play as to also test conventional prospects.
ExxonMobil will have the right to withdraw from the project at various stages, relinquish operatorship, and reassign to Patriot the right to the 70% participation interest it would have retained had it met all requirements of the agreement.
If exploration and development of the unconventional resources were to continue beyond the activities and costs enumerated above, those costs will be shared based on the parties’ participating interests.
Further exploration and subsequent development plans for the unconventional and conventional formations will be decided on once technical data obtained from drilling the deeper unconventional play and other sources are analyzed, Sintana said.
