Sirius, the investing company focussed on oil and gas exploration and development opportunities in Nigeria, announced on 10 October 2011 that the Company had entered into a Financial and Technical Services Agreement ("FTSA" or "the Agreement") with Owena Oil and Gas Limited ("Owena") and Guarantee Petroleum Company Limited ("Guarantee") in relation to a proposed investment in the Ororo marginal oil field which is located in Oil Mining Lease 95 ("OML 95") in shallow water offshore Ondo State, Nigeria, in water depths ranging between 23ft and 27ft.
Under the terms of the Agreement, Sirius committed to fund the preparation of a Competent Person's Report ("CPR") and it is expected that Gaffney, Cline & Associates will deliver the completed CPR on the Ororo field to the Company in February. The Company has also now completed the Environmental Impact Assessment ("EIA") on the Ororo field which will shortly be submitted to the Ministry of Environment in Nigeria for review. In addition, the management team has commissioned a preliminary Field Development Plan, subject to the results of the CPR and the Company is assessing suitable candidates to provide the appropriate oil services for the drilling operations on the field, including the procurement of a drilling rig slot for the second half of 2012.
Should Sirius decide to proceed to field development, Sirius will be entitled to a 40 per cent. interest in the Ororo field, jointly operating the field with Guarantee and Owena, and Sirius will fund 100 per cent. of the development costs. Upon production of oil, Sirius will pay a further US$500,000 in aggregate to Guarantee and Owena and will be entitled to a preferential cash flow from the production of crude oil to recover its investment, receiving 88 per cent. of net cash flows from Ororo, until full Cost Recovery is achieved, at which time Sirius' cash flow entitlement will revert to 40 per cent. in accordance with its equity interest. In addition, and in line with the Company's investing policy to target marginal fields with proven and probable oil reserves, the Board is pleased with the continued progress being made by its business development team in identifying and actively assessing additional assets.
Commenting, Ed Johnson, CEO of Sirius Petroleum, said: "We continue to make very good progress with the preliminary work on the Ororo field and look forward to moving this project forward with our partners. The progress so far has been extremely satisfactory, and we are looking forward to concluding the preliminary work programme imminently. Once the Final Investment Decision is reached, Sirius and our partners will be in a position to move to accelerated field development.
"We are very satisfied with our other business development activities in Nigeria, and we believe that Sirius remains well-positioned to deliver capture on our pipeline of additional opportunities in a timely fashion. We look forward to updating our shareholders as we make further progress."