Centric Energy has entered into a binding letter agreement whereby Tullow Oil has agreed to farm-in to a 50 percent participating interest in Centric Energy's 100 percent owned Production Sharing Contract covering Block 10BA in north-western Kenya. The closing of the farm-in is conditional upon completion of due diligence, the negotiation and settlement of definitive farm-in and joint operating agreements and the approval of the Kenyan Government and the TSX Venture Exchange.
Pursuant to the Letter Agreement, Tullow will earn a 50 percent participating interest in the PSC and will assume operatorship in return for:
-Reimbursing 50 percent of Centric Energy's acquisition costs for the PSC, which total approximately $750,000.
-Paying 80 percent of the first US$30 million of expenditures under the PSC.
-Assuming 80 percent of the bank guarantees and parent company guarantees during the period in which it is paying 80 percent of the expenditures under the PSC.
'Centric Energy is very pleased to have the opportunity to work with Tullow Oil on the exploration of Block 10BA,' said Alec Robinson, President & CEO of Centric Energy. 'Tullow's success and expertise in a similar geological setting in Uganda will ensure that Block 10BA is explored using the most modern exploration technology and in accordance with recognized international environmental standards and principles. Centric Energy intends to participate fully with Tullow in the exploration program.'
Block 10BA is strategically located within the East African Rift System which is enjoying increasing exploration interest and significant recent success, most notably in the Albertine rift in Uganda, 660 km to the west, which is considered to be the closest geological analog to the Tertiary basins underlying Block 10BA (source: Gustavson Associates, 'Resource Evaluation Report, Centric Energy Corporation, Kenya Block 10BA'). Major volumes of hydrocarbons have been discovered by Tullow Oil in the Albertine rift, currently estimated to be approx. 950 million barrels recoverable as stated in the press release issued by Tullow on July 28, 2010.
An independent assessment of the prospective resources of Block 10BA has been completed by Gustavson & Associates under a Resources Evaluation Report prepared in accordance with National Instrument 51-101 - Standards for Disclosure for Oil and Gas Activities. This report calculates prospective resources for 25 prospects in the Block. The total of the prospective resources ranges from a low case (P90) of 955 million BOEs up to a high case (P10) of 4,379 million BOEs, with a best estimate (P50) of 2,188 million BOEs. The January 1, 2010, report entitled 'Resource Evaluation Report, Centric Energy Corporation, Kenya Block 10BA' is filed on SEDAR under the Company's profile. Prospective resources are defined as 'those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. They are technically viable and economic to recover.' Note that the estimated prospective resources could be oil or gas and that the estimate does not include consideration for the risk of failure in exploring for these resources. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
Block 10BA is relatively under-explored, with the most recent seismic data acquired in 1991. It covers 16,205 sq kms (over 4,000,000 acres) in a part of the Rift System that includes portions of several Tertiary-age rift sub-basins, including the Kerio and Turkana basins and the northern part of the Lodwar basin. The Loperot-1 well was drilled by Shell Exploration (Kenya) in 1992 in the southern part of the Lodwar basin, 75 km to the south of Block 10BA, and encountered oil shows and mature source rocks, demonstrating the presence of a petroleum system (source: Kenya National Oil Corporation).
Further exploration opportunities and upside potential are provided by the Cretaceous-age Anza Graben, which underlies the northern part of Block 10BA. Ongoing studies of old, existing seismic data by Centric Energy show the presence of a very thick sedimentary section in this area, presumed to be of Tertiary and Cretaceous age. The acquisition of new seismic data will considerably improve the understanding of the hydrocarbon potential of this area, in addition to the remainder of the Block.
