Parex Resources Inc, a company focused on oil exploration and production in Colombia is pleased to announce the execution of a formal binding agreement with Empresa Colombiana de Petroleos S.A. ("Ecopetrol") whereby Parex will farm-in to operate and earn a 50% working interest in the Aguas Blancas light oil field located in the Middle Magdalena Basin of Colombia.
Aguas Blancas Oil Field
The Aguas Blancas oil field is located in the Middle Magdalena Basin immediately south of the La Cira-Infantas oil field which has produced approximately 850 million barrels of oil to date. Aguas Blancas was discovered in 1962 and was initially appraised with five wells in the period between 1962 and 1964. No wells have since been drilled. Cumulative oil production from the field is approximately 1 million barrels of light oil (28-33 API). The main producing horizon is the Mugrosa 'C' Formation at depths of 4,000-7,000 feet. Gross reservoir interval thicknesses in the Mugrosa 'C' range from 300-500 feet with up to 150 feet of net oil pay.
In 2011 a 3D seismic survey was acquired in anticipation of the field's development, however, no wells were drilled on it. The 3D survey indicates that the existing Aguas Blancas field is approximately 4,300 acres in aerial extent. Further, Parex believes that a satellite structure to the south of the main oil accumulation that has been tested by one well could be up to an additional 1,500 acres in aerial extent.
Ecopetrol had previously stated that it intended to offer undeveloped oil fields to industry operators. Pursuant to this strategy, Ecopetrol offered companies the opportunity to acquire up to a 50% working interest in the Aguas Blancas field in a competitive bidding process. Parex' winning bid requires investment during the initial earning phase of approximately $61 million by undertaking delineation drilling and waterflood pilot programs at its sole cost to earn a 50% working interest in the field. Subsequently, all future capital investment will provide Ecopetrol a 10% carry whereby Parex will spend 60% and Ecopetrol 40%. Revenues and operating costs will be based on the parties' 50% working interest.
The initial earning phase has a term of 3 years commencing after the transfers of the existing applicable operating and environmental permits have occurred, which is expected to be in place within 1 year. Parex has agreed to provide a performance bond to Ecopetrol for the full amount of its initial phase earning commitment of $61 million. Including the initial earning phase, the farm-in agreement has a term of 25 years and the agreement has a royalty regime that is consistent with the applicable Agencia Nacional de Hidrocarburos ("ANH") contracts.
Parex first entered Colombia in 2009 and now produces approximately 28,000 bopd in Colombia's Llanos Basin. Parex had identified the Middle Magdalena Basin as a key component of its strategy to grow oil production in Colombia to in excess of 50,000 bopd. Complementing the Aguas Blancas acquisition, Parex has an additional three 100% working interest exploration blocks in the Middle Magdalena Basin. Parex has ample financial liquidity to fund its development of Aguas Blancas. Along with a growing volume of profitable production, Parex has no bank debt and an undrawn credit facility of USD$200 million, and working capital of approximately USD$90 million as at June 30, 2015. In addition, Parex has demonstrated the operating capabilities to implement waterflood and other enhanced recovery techniques as a result of its management's experience in the development of the large oil fields it discovered in the Neuquen Basin of Argentina.