Sagres Finalizes Farmout Agreement with Canacol Energy on El Triumfo Block in Colombia
CALGARY, ALBERTA -- (Marketwire) -- 11/06/12 -- Sagres Energy Inc. (the "Company") (TSX VENTURE:SGI) announced today that it has finalized its farmout agreement with Canacol Energy Ltd. on the El Triunfo Block, which is comprised of 25,205 gross acres in the oil-rich Llanos Basin in the Department of Casanare, Colombia (the "Block"). The Block contains an undeveloped discovery well, La Cabana-1, that was drilled in 1984, on the flank of the 3D seismically defined San Sebastian prospect, and tested 736 bopd with water from the Mirador Formation and 338 bopd with no water from the Gacheta Formation, however was not put on production due to mechanical reasons. To date, there has been no commercial production on the Block, but there are several undrilled prospects that have been identified on 3D seismic.
As previously announced Sagres entered into a purchase and sale agreement and farmout agreement to acquire the right to earn a participating interest in the Hydrocarbon Exploration and Production Agreement (the "E&P Agreement") related to the Block. Pursuant to the terms of the E&P Agreement, the participating interest holders are required to drill two exploration wells on the Block. Sagres has the right to earn an undivided 70% participating interest and assume operatorship in the Block by paying 100% of the costs relating to the first of the two wells, with the opportunity to earn an additional 12.5% participating interest after the drilling of the second well.
Under the terms of the farmout agreement among Sagres and Canacol, Canacol acquired 50% of Sagres' 70% net working interest in the Block by agreeing to pay 50% of outstanding back costs related to the Block, which is approximately US $2,432,380, and by paying its pro-rata share of future costs related to the Block. In exchange for the back cost payment, Sagres issued Canacol an interest-free secured promissory note which will fall away upon the spudding of the first well on the Block. Canacol also has an option to pick up an additional 10% working interest from Sagres, up until the spudding of the first well, by paying 20% of the total costs associated with Phase 5 of the exploration program, which includes the drilling of the first exploration well along with all related G&G and other associated costs.