The Company's operational focus continues to be in Algeria through the ongoing appraisal of the world class Ain Tsila discovery and the introduction of an outstanding new partner to the Isarene PSC ("PSC").In April, Petroceltic signed an Agreement with Enel Trade S.p.A. ("Enel") under which Enel acquired an 18.375% interest in the Isarene PSC from Petroceltic.
Upon completion of the farm-out, Petroceltic will hold a 56.625% interest in the PSC and continue as Operator. Enel will hold an 18.375% interest and Sonatrach will hold the remaining 25%. Enel is one of the largest European energy utilities and is the second largest buyer of Algerian gas. Enel's unparalleled knowledge of European gas markets combined with its historic relationship with Sonatrach makes it an ideal partner for this phase of the Isarene development project. In addition to the capital investment, this strategic alliance should provide substantial support for the future marketing of Isarene gas.
Under the terms of the farm out agreement, Enel has agreed to pay up to US$101 million towards work programme expenditure incurred by Petroceltic. This payment represents the aggregate of i) Enel's share of the back costs, incurred from the signing of the PSC in 2005 until the end of the exploration period in April 2010; and ii) a contribution of 49% of the cost of the first six appraisal wells in the current enlarged Isarene appraisal campaign. In addition to these payments, Enel has agreed a contingent cash consideration payment of up to a maximum of US $75 million, to be determined by the level of recoverable reserves approved by the Algerian Authorities in the Final Field Discovery Report which is expected to be submitted in early 2012. Should the entire contingent amount be payable, the maximum potential expenditure by Enel to acquire an 18.375% interest in the Isarene block is in excess of US$183 million.
This transfer of interest is subject to certain conditions, including the signature of the amendment to the PSC, which was duly executed on 28th April 2010. The sole condition which remains outstanding relates to the ratification of the amendment by Executive Decree of the Council of Ministers in Algeria. This is an administrative process which does not involve or require any further examination of the terms of the agreement and we remain confident that this ratification will be received during the third quarter.
Upon ratification, Petroceltic will receive in excess of US$74 million as an initial payment (assuming ratification in the next month) from Enel, comprising back costs and their 49% share of the 2011 appraisal campaign costs incurred to date. The initial payment will be settled by Enel within 30 days following ratification. Following completion, Enel will contribute their 49% share of ongoing appraisal costs on a monthly basis, payable in advance.
The current appraisal drilling campaign commenced in November of 2010, and follows the Company's highly successful 2009/10 five well programme. Following the agreement of the Enel farm-out, the initial appraisal programme has been enlarged to include a minimum of six wells.
In May 2011, Petroceltic entered into a contract for drilling rig services with KCA Deutag. Their Nomad class drilling rig T-211 was contracted to work alongside the Dalma Rig LR-12 on the Ain Tsila Field programme. The addition of this second rig has facilitated an increase in the pace and scope of the appraisal campaign.
Drilling and testing operations have continued throughout the period with two rigs and a rigless testing and fracture stimulation unit currently deployed in the field. The key objectives of the appraisal programme are to confirm the most likely recovery factors for the field, to optimise the development plans and to establish the likely plateau production profiles for the gas sale contract negotiations.
The first three wells of the programme AT-4, AT-5 and AT-6 have all encountered gross gas columns that were in excess of the pre-drilling prognosis and these results are likely to have a positive impact on the Gas Initially In Place volumes for the field. The Company expects to publish an updated view of the Gas Initially In Place in the field after the completion of the current round of appraisal drilling and testing.
Although the recent test result from the AT-5 well was below expectations, it achieved a commercial flow and provided important operational data in respect of the future design, drilling and testing of appraisal and development wells, and we look forward to a number of important well and test results over the coming months. AT-7 and AT-8, are currently drilling ahead to their target depths, while testing operations on the AT-6 well are due to be completed in early September. It is anticipated that all Field operations are scheduled for completion by December 2011 to allow for updating of the field model and development plan and the submission of the Final Field Discovery Report and preparation of an Independent Reserve Report in Q1 2012.