28th Apr 2014 11:18
LONDON (Alliance News) - San Leon Energy Monday said it had agreed key commercial terms with Baker Hughes Poland Sp Zoo for work on the Siekierki gas field development in Poland.
In February, Baker signed a letter of intent to bring the Siekierki gas field into production, and talks on the commercial terms of the deal as well as operational planning progressed significantly since then in an effort to ensure workovers on the four Trzek wells are carried out in the summer and production is established as quickly as possible, San Leon said in a statement.
In return for funding work on wells over three phases with cash, Baker will will receive an undisclosed return on this risked investment from 75% of profits generated from production, until Baker's investment has been fully recovered. Baker will also receive a net profit interest of 10% in any wells that they fund during the first two phases of the work, with the interest to begin as soon as full recovery of Baker's costs has occurred.
"The duration of the net profit interest is expected to constitute the large majority of the wells' production period. The companies will explore cost-effective solutions for funding Phase 3, which may include Baker funding the facilities," San Leon added.
The first phase of the work under the deal encompasses the workover and testing of the Trzek-2ZH and Trzek-3H wells, permitting and commercialisation planning. The second phase includes the workover and testing of the Trzek-1 well and construction of a water disposal well, plus well permitting and commercialisation planning. The Krzesinki-1 well will be subject to further evaluation and will be included in Phase 2 at Baker Hughes' discretion, San Leon said.
The third phase of the work includes the design and installation of facilities and transport infrastructure necessary to begin sale of hydrocarbons from the phase one and two wells.
"We expect a joint press release will be issued in the near future when final documents are signed. In the meantime, technical and operational teams from both companies are putting plans in place for Phase 1 testing and completion," San Leon Chairman Oisin Fanning said in a statement.
San Leon shares were up 0.5% at 3.12 pence Monday morning.
By Steve McGrath; [email protected]; @SteveMcGrath1
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