TORONTO, Nov. 24, 2011 /PRNewswire/ - PetroMagdalena Energy Corp. (TSXV: PMD) is pleased to announce that it has executed a conditional assignment agreement whereby it will acquire an additional 32.5% working interest in the Arrendajo block in the Llanos basin. In addition, the Company announces the conclusive and final settlement with Beta Energy Corp., whereby it regains control of two rigs located in Colombia, one of which will be used to drill the upcoming Yopo exploration well on the Cubiro block.
Luciano Biondi, the Company's Chief Executive Officer stated, "When new management took over the Company earlier this year, our priorities were to focus on re-establishing investor confidence in the portfolio, develop our core oil assets, clean up our financial position, improve our cash flow, and increase production. The acquisition of an additional interest in Arrendajo, which is close to our core property Cubiro, and the settlement with Beta Energy are consistent with these objectives and we are pleased that through our recent exploration and development success, production continues to grow."
Acquisition of Additional Interest in Arrendajo
The Company has entered into an assignment agreement, conditional only upon the approval of the Agencia Nacional de Hidrocarburos (ANH), with Pacific Stratus Energy Colombia Corp., Sucursal Colombia, a subsidiary of Pacific Rubiales Energy Corp. When this process is duly completed, PetroMagdalena will have a 67.5% participating interest in the Arrendajo Block.
The block covers an area of 31,606 hectares, and it is located only 5 km to the north-east from the Cubiro Block. Its exploration plays are of the same type as in the Cubiro Block, where PetroMagdalena has recently discovered three light oil fields and added 5 million barrels of 2P reserves. Operations at Arrendajo will be supported by the pre-existing main operations base of the Company on the nearby Cubiro block.
197 km2 of 3D seismic have been acquired on the Arrendajo Block, covering an area of 19,700 hectares, or 62% of the block acreage, and most of the prospective areas. The interpretation of the 3D seismic data has identified six drillable prospects. The block is under an E&P ANH contract. Currently in its sixth and final phase of the exploration program, one well needs to be drilled to fulfill all ANH work commitments on the block. Two exploration wells are planned to be drilled with the program commencing in December 2011.
PetroMagdalena has agreed, at its sole risk, to assume a full carry obligation of the obligations of Pacific Stratus under the ANH contract, until the assignment is approved. The purchase price for the acquisition is US$10 million which shall be paid to Pacific Stratus out of sales from production from the Arrendajo Block.
The Company has entered into a settlement agreement with Beta Energy Corp. in respect of two arbitration disputes involving (i) the ownership of one 750 HP drilling rig and one service rig, and (ii) a master services contract for drilling rigs. In accordance with the settlement agreement, the parties have terminated all ongoing arbitration and all present and future claims have been settled in full; as well, all contracts with Beta have also been terminated. The Company plans to mobilize the 750 HP drilling rig, currently stacked on the Cubiro block, to drill the Yopo exploration well in December of this year, under an operation contract with a Colombian drilling services provider.
PetroMagdalena paid certain amounts owing to Beta in exchange for the undisputed ownership of both rigs. The Company also obtained full indemnity from Beta for any and all claims by third parties.
Stock Option Grants
On November 11, 2011, a total of 4,278,000 stock options were granted to directors, officers and employees of the Company at an exercise price of CA$1.60 per common share. The options vested immediately and have a term to expiry of five years.
PetroMagdalena is a Canadian-based oil and gas exploration and production company, with working interests in 19 properties in five basins in Colombia. Further information can be obtained by visiting our website at www.petromagdalena.com.
All monetary amounts in U.S. dollars unless otherwise stated. This news release contains certain "forward-looking statements" and "forward-looking information" under applicable Canadian securities laws concerning the business, operations and financial performance and condition of PetroMagdalena. Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to estimated production and reserve life of the various oil and gas projects of PetroMagdalena; the estimation of oil and gas reserves; the realization of oil and gas reserve estimates; the timing and amount of estimated future production; costs of production; success of exploration activities; and currency exchange rate fluctuations. Except for statements of historical fact relating to the company, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of PetroMagdalena and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions, risks relating to international operations, fluctuating oil and gas prices and currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the oil and gas industry, failure of plant, equipment or processes to operate as anticipated. Although PetroMagdalena has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. PetroMagdalena undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.
Statements concerning oil and gas reserve estimates may also be deemed to constitute forward-looking statements to the extent they involve estimates of the oil and gas that will be encountered if the property is developed. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Estimated values of future net revenue disclosed do not represent fair market value.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
SOURCE PetroMagdalena Energy Corp.