Pancontinental Oil & Gas and its wholly owned subsidiary Afrex Limited (together “Pancontinental”) has entered a farm-in agreement for the onshore portion of Kenyan exploration area Block L6 in the Lamu
Basin. Block L6 is partly onshore and partly offshore.
Under the terms agreed with farminee Milio E&P Limited (“Milio”) and Milio International the current joint venture parties including Pancontinental will be fully funded through drilling and testing an onshore exploration well in Block L6 with an expected spud date in early 2015.
In addition, before the well, the current joint venture parties will be fully funded through the acquisition, processing and interpretation of a regional 1,000km of 2D seismic survey aimed to confirm at least three prospects as drilling targets. The seismic programme is expected to commence in April 2014.
In consideration of Milio funding that work, Milio will earn a sixty percent (60%) participating Interest in the onshore portion of Block L6. Milio will not earn any interest in the offshore portion of Block L6. Milio will become the Operator of the onshore portion and FAR will remain the Operator of the offshore portion of the Block.
Under the agreement Pancontinental will retain a 16% working interest in the onshore part of Block L6.
The farm-in is conditional on obtaining the appropriate Kenyan Government approval.
The offshore L6 participants (Pancontinental and Flow Energy Pty Ltd, a subsidiary of FAR (“FAR”)) are currently seeking a farminee to drill an offshore well in addition to the onshore well to be drilled by Milio. Pancontinental retains its current 40% interest in the offshore part of Block L6.
Block L6 is well situated in relation to Kenyan coastal communities and infrastructure. An onshore oil or gas development has the potential to contribute significantly to Kenya’s growing near-term energy needs. A gas discovery could supply gas to a major power generation project that is currently under consideration by the Kenyan Government.
Two of the main Prospects covered by 3D seismic offshore L6 are the Kifaru and Kifaru West Miocene Reef prospects, which share similar characteristics to the Sunbird Prospect currently being drilled by Pancontinental and its joint venture partners in offshore Kenya area L10A.
“ We are very pleased to have secured our new partner Milio for seismic and drilling onshore L6.Pancontinental retains a healthy 16% free-carried interest onshore and additionally has the benefit of retaining its 40% interest offshore where we are also seeking a farminee for drilling,” Barry Rushworth, CEO and Director of Pancontinental commented.
“This new farm-in deal secures funding for evaluating the significant potential of the onshore part of Block L6 and to help unlock the potential of the wider Lamu basin in which Pancontinental has a very large acreage position of some 20,000 square kilometres gross.The offshore area already has several Prospects covered by 3D seismic and ready for drilling including the large Kifaru and Kifaru West Miocene Reef Prospects. A number of other reefs have also been tentatively identified on 2D seismic”. He added.