London-listed President Petroleum has signed a farm-in agreement for the CNO-8 “Puesto Guardian” licence in the Noroeste basin in Salta province, Argentina.
President will pay Tripetrol Petroleum $1.5 million in cash, 5.1 million shares worth about $2 million and fund half of an initial $21.5 million work programme to earn a 50% stake in the licence.
Five wells will be drilled during the initial work programme, consisting of four wells on proved undeveloped reserve and one probable location, with the first well expected to spud in November.
"This acquisition has a solid foundation around existing producing fields, and holds significant exploitation potential with the ability to materially grow production through a clearly thought out near term drilling and completion programme,” President chairman Peter Levine said.
“President considers Argentina a very fertile location to build a major hydrocarbon producing business, making material investments in the local economy, engaging with well connected partners, training and growing a local workforce and benefitting the communities where the company works.”
The Puesto Guardian concession includes five fields, four of which are producing light, sweet crude from the Cretaceous Yacoraite formation which is being trucked to a local refinery.
The field was discovered in 1937 by YPF and output peaked in the early 1980’s at 9000 barrels per day, however President said only one well had been drilled since the concession was awarded to a consortium including the current operator Petrolera San Josein in 1991 as part of the privatisation of YPF.
President said output had been steadily declining, from about 1100 bpd in 1994 to between 450 and 500 bpd currently.
An independent reserve audit last year estimated gross proven plus probable reserves of 7.4 million barrels as at 31 December 2009 within the confines of the existing licence period to 2016.
However President added an application for a concession extension to 2026 had been submitted in March and an agreement was expected by the end of the year.