Sterling Energy has announced that completion has now occurred under the Farmout Agreement with Jacka Resources Somaliland for the acquisition of an additional 15% interest in the Production Sharing Contract (PSC) for the Odewayne Block, located onshore in the Republic of Somaliland.
The holders of the PSC are now: Genel Energy Somaliland Limited (Operator) 50%, Sterling Energy (East Africa) Limited 40%, Petrosoma Limited 10%.
The PSC, awarded in 2005, is in the Third Period (expiring November 2014) with an outstanding minimum work obligation of 500 km of 2D seismic. The minimum work obligation during the Fourth Period of the PSC (expiring May 2016) is for 1,000 km of 2D seismic and one exploration well. Sterling will be carried by Genel for the costs of all exploration activities during the Third Period and the Fourth Period of the PSC.
The PSC covers Block SL6 and part of Blocks SL7 and SL10, onshore Somaliland, comprising an area of 22,840 sq kms. During 2013 an aero-magnetic and gravity survey confirmed the geometry of a broad basin over the Odewayne block believed to be of Jurassic to Cretaceous origin, analogous to productive basins in Yemen. Fieldwork in the block has highlighted the presence of numerous seeps giving encouragement that a working hydrocarbon system is present in this undrilled basin.
The forward work program includes acquisition of an extensive 2D seismic programme to define drillable targets. Operations in Somaliland have been delayed by security concerns and the operator, on behalf of the joint venture partners, is working with the Ministry of Energy and Minerals to resume operations as soon as practicable.
Genel Energy Somaliland (Operator) is a subsidiary of Genel Energy and Petrosoma is a privately owned company. As previously announced future conditional payments by Sterling of $8m are to be paid to Petrosoma upon various operational milestones being met.
“We are very pleased to have completed this transaction with Jacka for the Odewayne Block. We have built a material stake of 40% in the PSC and significantly lowered our cost of entry from $1m to $0.625m for each 1%. Under the initial Jacka and Petrosoma transactions, Sterling would have paid US$25m for a 25% interest; we will now pay US$25m for a 40% interest in the PSC,” said Sterling Energy’s Chairman, Alastair Beardsall.
“Our financial exposure during the Third and Fourth Periods is limited to $8m future conditional payments under the Petrosoma transaction, all other exploration costs will be paid by Genel. We consider the Odewayne Block to be highly prospective and look forward to working with our joint venture partners in the exploration of this largely unexplored block,” he concluded.