CALGARY, Feb. 28, 2014 /CNW/ - PetroNova Inc. ("PetroNova"
or the "Company") (TSX-V: PNA), a company engaged in the
exploration and development of oil and natural gas resources in
Colombia, is pleased to announce
that its indirect wholly owned subsidiary, PetroNova Colombia Inc.
("PetroNova Colombia"), has entered into a farm-out agreement (the
"FOA") with a wholly owned subsidiary of Pacific Rubiales Energy
Corp. ("Pacific Rubiales") (TSX:PRE; BVC: PREC; BOVESPA: PREB) for
the exploration and potential development of PetroNova's operated
Tinigua exploration and production contract (the "Tinigua
Contract") awarded by the Agencia Nacional de Hidrocarburos of
Colombia (the "ANH"). PetroNova
currently owns 90% of the rights to the Tinigua Contract indirectly
through PetroNova Colombia.
Antonio
Vincentelli, President and CEO of PetroNova, commented,
"The Tinigua prospect is one of the largest unexplored prospects in
Colombia and the highest impact
prospect in PetroNova's portfolio, with best estimate unrisked
Prospective Resources of approximately 159 million barrels. This
agreement enables PetroNova to develop the Tinigua prospect with
minimum additional financial commitments until the commercial
phase. We are looking forward to working with such a prominent
Colombian oil and gas exploration and production company to
determine the potential of the Tinigua prospect."
Key terms and conditions
Pursuant to the terms of the FOA, Pacific
Rubiales will pay PetroNova Colombia a cash consideration of
U.S.$12.5 million for back-costs
associated with the Tinigua Contract, and will carry the cost of
drilling, completing, and testing of up to four wells for up to
U.S.$33 million to earn a 50%
participating interest in the Tinigua Contract.
Pacific Rubiales will assume up to
U.S.$19 million of Pacific Rubiales'
and PetroNova Colombia's share of the capital and operational
expenditures for the first and second exploratory wells to be
drilled in the Tinigua Contract area, of up to U.S.$12 million and up to U.S.$7 million, respectively.
Should Pacific Rubiales refrain from exercising
its right of withdrawal after the first exploratory well, Pacific
Rubiales will assume up to U.S.$7
million of Pacific Rubiales' and PetroNova Colombia's share
of the capital and operational expenditures for each of the third
and fourth exploratory wells to be drilled in the Tinigua Contract
area (the "Additional Carry Obligation"). PetroNova Colombia's
share of the Additional Carry Obligation will be repaid to Pacific
Rubiales by PetroNova Colombia out of 50% of PetroNova Colombia's
corresponding production share from the Tinigua Contract.
During the last phase of the exploration period
of the Tinigua Contract, Pacific Rubiales shall have, at its sole
discretion, the option to be designated the operator of the Tinigua
Contract. If Pacific Rubiales elects to become the operator,
Pacific Rubiales will pay PetroNova Colombia an additional one-time
consideration of U.S.$4 million.
The Joint Operating Agreement negotiated
corresponds with The Association of International Petroleum
Negotiators' 2002 model Joint Operating Agreement and reflects a
balanced condition of the parties according to the participating
interests in the agreement.
Closing of the transactions contemplated by the
FOA is subject to customary closing conditions, including the
receipt of ANH approval.
Tinigua exploration and production
contract:
The Tinigua Block is 105,471 gross acres in size
and is located in the northern portion of the Caguan-Putumayo
Basin. The Tinigua prospect is a large fault propagation fold
structure, with an aerial extension of approximately 15
km2 confirmed by 109 km2 of 3D seismic.
Petrotech Engineering Ltd. prepared an independent resource
assessment report for PetroNova effective February 28,
2013 (the "Petrotech Report") in which the Tinigua prospect
was assigned a total best estimate (P50) Prospective Resources of
approximately 159 million barrels of heavy oil. The Petrotech
Report was prepared in compliance with National Instrument 51-101
- Standards of Disclosure for Oil and Gas
Activities and the COGE Handbook.
PetroNova Colombia has been granted an
environmental license for the Tinigua Block to drill up to twenty
exploratory wells from five different platforms and install surface
facilities required to conduct the extended testing if
required.
The first exploratory A3 well is expected to
spud in the second half of 2014 and will target both the tertiary
Mirador Formation as well as the Cretaceous age Macarena Group with
a total depth of approximately 6,500 feet.
About PetroNova:
The Company, through its subsidiaries, is
engaged in the exploration for, and the acquisition and development
of, oil and natural gas resources in South America, specifically in Colombia. The Company's assets currently
include the Company's interests in the PUT-2 and Tinigua Blocks
located in the Caguan-Putumayo Basin in Colombia, both of which are operated by the
Company, and the non-operated Llanos Blocks located in the Llanos
Basin in Colombia. The common
shares of the Company trade on the TSX Venture Exchange under the
stock symbol "PNA".
Neither the 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 release.
Reader Advisories:
Forward-Looking Information
Certain statements contained in this press
release constitute forward-looking statements. These statements
relate to future events or the Company's future performance. All
statements other than statements of historical fact are
forward-looking statements. The use of any of the words
"anticipate", "intend", "plan", "continue", "estimate", "budget",
"targeting", "project", "expect", "may", "will", "might", "should",
"could", "believe", "predict" and "potential" and similar
expressions are intended to identify forward-looking statements.
Such statements represent the Company's internal projections,
estimates, expectations, beliefs, plans, objectives, assumptions,
intentions or statements about future events or performance. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. Management believes the expectations reflected in these
forward-looking statements are reasonable but no assurance can be
given that these expectations will prove to be correct and such
forward-looking statements included in this press release should
not be unduly relied upon. These statements speak only as of the
date of this press release.
In particular, this press release contains
forward-looking statements pertaining to the closing of the
transactions contemplated by the FOA, including the approval of the
ANH; and the Company's future exploration and development
activities with respect to the Tinigua Block and the timing
thereof. With respect to forward-looking statements contained in
this press release, assumptions have been made regarding, among
other things: the ability of PetroNova to obtain the approval of
the ANH in a timely manner; the ability of the parties to satisfy
the other conditions contained in the FOA in a timely manner; the
completion of the transactions contemplated by the FOA as currently
contemplated by the parties; general economic, market and business
conditions in Colombia and
globally; future crude oil and natural gas prices; the continued
availability of capital, undeveloped lands and skilled personnel;
the ability to obtain equipment in a timely manner to carry out
exploration and development activities; the regulatory framework
governing royalties, taxes and environmental matters in
Colombia and any other
jurisdictions in which the Company may conduct its business in the
future; the ability of the Company to obtain the necessary
approvals, permits and licences to conduct its operations; future
capital and exploration expenditures to be made by the Company;
future sources of funding for the Company's exploration program;
the geography of the areas in which the Company is exploring; and
adequate weather and environmental conditions.
Information relating to "resources" is deemed to
be forward-looking information as it involves the implied
assessment, based on certain assumptions and estimates, that the
resources described exist in the quantities predicted or estimated
and can be profitably produced in the future.
Actual results could differ materially from
those anticipated in these forward-looking statements as a result
of certain risk factors, including, but not limited to: general
economic, market and business conditions; risks related to the
exploration, development and production of oil and natural gas;
risks inherent in the Company's international operations, including
security and legal risks in Colombia; risks related to the timing of
completion of the Company's projects; competition for, among other
things, capital, the acquisition of resources and skilled
personnel; actions by governmental authorities, including changes
in government regulation and taxation; the failure of the Company
to obtain the necessary approvals, permits and licences to conduct
its operations; environmental risks and hazards; the availability
of capital on acceptable terms; the failure of the Company or the
holder of certain licenses or leases to meet specific requirements
of such licenses or leases; adverse claims made in respect of the
Company's properties or assets; failure to engage or retain key
personnel; geological, technical, drilling and processing problems,
including the availability of equipment and access to properties;
failure by counterparties to make payments or perform their
operational or other obligations to the Company in compliance with
the terms of contractual arrangements between the Company and such
counterparties; and the other factors discussed under the heading
"Risk Factors" in the Company's annual information form for
the year ended December 31, 2012 and
the Company's other continuous disclosure documents filed from time
to time with applicable securities regulatory authorities in
Canada and which may be accessed
on the PetroNova's SEDAR profile at www.sedar.com.
With respect to the FOA and the transactions
contemplated thereby, the risks and uncertainties include the
failure of PetroNova to obtain the approval of the ANH or the
failure of the parties to otherwise satisfy the conditions
contained in the FOA, in a timely manner, or at all. Failure to so
obtain ANH approval, or the failure of the parties to otherwise
satisfy the conditions contained in the FOA, may result in the
transactions contemplated in the FOA not being completed on the
proposed terms, or at all, the result of which could have a
material adverse effect on PetroNova's financial position and
results of operations and its ability to fund current operations on
the Tinigua Block.
Readers are cautioned that the foregoing
lists of factors are not exhaustive. The forward-looking statements
included in this press release are expressly qualified by this
cautionary statement and are made as of the date of this press
release. The Company does not undertake any obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or results or otherwise,
except as required by applicable securities laws.
Resources
Prospective Resources are those quantities of
oil and gas estimated, as of a given date, to be potentially
recoverable from undiscovered accumulations by application of
future development projects. Prospective Resources have both an
associated chance of discovery and a chance of development. The
chance of commerciality is the product of these two risk
components. The Prospective Resource estimates contained herein
have not been risked for either the chance of discovery or the
chance of development. There is no certainty that any portion of
the Prospective Resources will be discovered. If discovered, there
is no certainty that it will be commercially viable to produce any
portion of the Prospective Resources. Application of any geological
and economic chance factor does not equate Prospective Resources to
contingent resources or reserves.
As with all oil and gas fields at this stage
of appraisal, there are significant positive and negative factors
which may impact the resource volumes for the Tinigua Block. There
is a significant range of uncertainty associated with the resource
volumes due to risk elements such as trap and seal characteristics;
reservoir presence and quality; source rock capacity, quality and
maturity; and timing, migration and preservation of petroleum in
relation to trap and seal formation. Uncertainty ranges are
described by the Canadian Oil and Gas Evaluation Handbook as low,
best and high estimates for resources. The "best estimate" is
considered to be the best estimate of the quantity that will
actually be recovered from the accumulation. It is equally likely
that the actual remaining quantities recovered will be greater or
less than the best estimate.
SOURCE PetroNova Inc.