Pacific Rubiales Energy Corp. (PRE.TO) announced Tuesday that it has reached an agreement with Karoon Gas Australia Ltd. (KAR.AX) to acquire a 35% net working interest in S-M-1101, S-M-1102, S-M-1037 and S-M-1165 exploration blocks, and also has as an option to acquire a 35% interest in S-M-1166.
In consideration for acquiring the interests in the Karoon Blocks, the Company will pay Karoon U.S. $40 million in cash as consideration for the assignment and fund up to U.S. $210 million in carried well costs.
The transaction agreement consists of a U.S. $40 million payment to Karoon as consideration for the assignment, plus a carry of well costs of up to U.S. $70 million for each of the Kangaroo and Cassowary/Emu exploration wells for a total well carry cost of up to U.S. $140 million. After meeting up to the first U.S. $70 million costs for each of the first two wells, the Company will fund 35% of all costs thereafter.
The company said it may elect to participate in the third well of the three well exploration commitment program, the Bilby well. If the option is exercised, Pacific Rubiales must carry up to the first U.S. $70 million in costs for the Bilby well and contribute 35% of all costs thereafter.
All three wells are expected to be drilled during 2013. Karoon will remain the operator of the Karoon Blocks until the completion of the three well exploration program and then Pacific Rubiales will be entitled to request the operatorship, the company said.
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