TG World Energy (TG World) has signed farm-in agreements for a 12.5% equity interest in two Philippine offshore development ready oil discoveries. The property, known as service contract 54A (SC54A), is located offshore in the North West Palawan basin of the Philippines covering an area of 867sqkm.
The SC54A contains two development ready oil discoveries, Tindalo and Yakal, where aggregate contingent resources oil in place of 16 million barrels (P50) has been independently verified by ISIS Petroleum Consultants as of February 2009 (Tindalo 11.0mm bbls, Yakal 5.1mm bbls).
Project partners in SC54A, after the farm-in is complete, include project operator Nido Petroleum (Nido) of Perth, Australia at 42.4%, Kairiki Energy (Kairiki) of Perth, Australia at 30.1% and Trafigura Ventures III BV of Singapore at 15%. TG World will receive 7.6% of its acquired interest from Nido and 4.9% from Kairiki.
Consideration for the 12.5% interest totals $11.1m and is comprised of approximately $5.25m upon execution of the farm-in agreements and the balance paid in staged payments following first oil and subsequent crude offtakes. Funds are provided by TG World from cash on hand. The transaction is subject to approval of the Philippine government.
In 2008, Nido completed a two well exploration program in SC54A that resulted in the Tindalo and Yakal oil discoveries. Both wells were suspended without testing as potential oil producers based on interpretation of well log and drilling data. The Tindalo well identified a 124mt to 144+ mt oil column and Nido has since fast-tracked a low cost, well development program.
Nido has commissioned drilling contractor Vantage Drilling for the development and completion of the Tindalo discovery, which is positioned at water depths of approximately 100mt. Completion and extended well test operations are scheduled to commence in the second quarter of 2010 with first oil expected shortly thereafter.
Nido has anticipated initial oil production from the Tindalo well at 7,000 to 15,000 barrels of oil per day, based upon independent party assessment. The production estimate is based upon subsurface geological modelling and reservoir simulation consistent with production history matching of two nearby oil fields (Nido A&B fields located nine miles to the south) that have produced 19 million barrels to date from the same age reservoir. Recoverable oil over an approximate 18 month life may range between 5-6 million barrels for Tindalo.
Cliff James, president and CEO of TG World, said: “Our involvement in SC54A not only provides near-term cash flow if successful, but also places us in the middle of a prolific development and exploration fairway. In addition to the four discoveries identified (Tindalo, Yakal, Nido 1X1 and Signal Head 2), SC54A contains some 19 other identified pinnacle reef targets that may offer follow-up successes.
“The oil and gas potential and advantageous fiscal regime of the Philippines has been recently validated by the continued participation and new entry of major players in the Palawan Basin, including Shell, Chevron, BHP Billiton and Exxon Mobil. Nido has had a first-rate history in the Philippine oil and gas industry and we look forward to a fruitful working relationship.”