Vast Exploration signs Iraq exploration deal
2008-05-20 16:01 MT - News Release
Mr. Stan Bharti reports
VAST COMPLETES PRODUCTION SHARING CONTRACT IN THE KURDISTAN REGION-IRAQ
Vast Exploration Inc., with its consortium partner Niko Resources Ltd., as operator, has entered into a production sharing contract (PSC) with the Kurdistan Regional Government -- Iraq (KRG), for the exploration, development and production of petroleum resources in the 846-square-kilometre Qara Dagh block in the Sulaymaniya governorate of the Federal Region of Kurdistan -- Iraq.
The Kurdistan licence map can be found on-line.
The company has been involved in a competitive bidding process and advanced negotiations with the KRG over the past eight months. The final terms were agreed in principle late last year, subject to KRG approving the operator. Under the final agreement reached with the KRG, Niko Resources Ltd. shall act as operator for the block. Niko Resources Ltd., with a market capitalization in excess of $4.5-billion, was selected by the company as the operating partner due to its considerable international experience, including activities in India, Thailand and Bangladesh.
According to the terms of the PSC, the consortium has a 60-per-cent net participating interest, not subject to further dilution by the KRG. Vast and Niko Resources Ltd. each hold a 27-per-cent net participation interest in the block, and Groundstar Resources Ltd., the third member of the consortium will have a minority net participation interest of 6 per cent. The government will have a direct 20-per-cent interest which will be carried exclusively by the consortium. The remaining 20 per cent is reserved by the government to be assigned to a third party or parties within a period of eight months, with the requirement to pay back their share of petroleum costs incurred by the consortium.
The obligations under the PSC include a one-time signature bonus and initial capacity building bonus paid to the government within a period of 30 days from the execution date of the contract. Annual contributions to personnel, training, environmental and technological funds established by the government, as well as further community support contributions, are to be paid over a period of 15 months to assist with infrastructure projects in the region. The consortium will also be responsible for paying its proportionate share of certain production bonuses in the case of commercial discovery. The remaining minimum work program obligation represents an exploration commitment, expected to commence in the near future, which includes the acquisition, processing and interpretation of a minimum of 300 kilometres of 2-D seismic data and drilling of one well during the first exploration period. The company expects to spend in excess of $40-million over the next three years on the block. During the next 90 days, the company intends to evaluate its financing options to raise approximately $30-million, of which, it anticipates approximately $10-million will be spent on capital expenditures in 2008.
Stan Bharti, chairman of the board of directors, commented: "This transaction is a significant milestone for our company and its shareholders. We have been evaluating opportunities globally for Vast, and we are delighted to get involved in a region with relatively low geological risk, reasonable commercial terms and clearly established transparent contractual model and legal framework. The Qara Dagh block offers excellent potential for a major oil discovery, and it strongly positions the company to pursue further opportunities in the region. We look forward to an aggressive exploration campaign."
Preliminary geological studies including surface mapping and subsurface stratigraphical analysis have been initiated by the company. An independent evaluator engaged by the company has reviewed neighbouring oil and gas accumulations with recoverable reserves in the range of 30 million to 600 million barrels oil equivalent based on previously released public information.
Edward Sampson, chairman of Niko Resources Ltd., commented, "We are very pleased to partner with Vast on this world-class opportunity."
Conference call
The company will host a conference call to update shareholders on Wednesday, May 21, at 11 a.m. ET. Mr. Bharti, Ahmed Said and General (retired) Jay Garner will moderate the call.
Date: Wednesday, May 21, 11 a.m. ET. Local callers: 416-695-6320, North American callers: 1-888-818-4097, international callers: +1-416-695-6320.
Kurdistan region
The Kurdistan region is a semi-autonomous area located in the Federal Republic of Iraq, adjacent to Turkey, Iran and Syria. The KRG is a secular, democratically elected body that exercises executive power within the region. Due to historical political issues, this area has had very limited petroleum exploration and exploitation, despite being located in a prolific basin with giant discoveries such as the Kirkuk field.
