|Friday, 7 May 2010Marija Stojkovic|
EXPLORATION work on Neon Energy’s Block 105 in the Song Hong Basin, offshore Vietnam, will be fast tracked after the company signed a farm-out agreement for a portion of the block to Singapore-based KrisEnergy.
Last week, PNG's sister publication PNN reported Neon was in advanced discussions with an unnamed third party to farm-in to the block and was expected to announce an agreement soon.
KrisEnergy, a Singapore-based oil and gas company, recently farmed into Neon’s offshore Block 120, also in Vietnam, with Bermuda-based Enovation Resources.
Under the farm-out agreement for Block 105, KrisEnergy will pay Neon $US1.375 million for a 40% interest and also pay 100% of the cost of the seismic work obligation capped at $US2.75 million.
Neon will retain a 50% interest in the block and operatorship.
Block 105 covers 7192 square kilometres of the Song Hong Basin and is relatively underexplored despite discoveries nearby within the same sedimentary basin.
The producing Dongfang and LeDong gas fields lie about 35km from the block’s eastern boundary and are estimated to contain ultimate recoverable reserves up to 1.5 trillion cubic feet.
Neon said the farm-out would speed up exploration in the block which consists of recording 1500 kilometres of seismic.
The company has secured the Aquila Explorer vessel to carry out the seismic in late June immediately following the completion of seismic in Block 120.
The seismic on Block 105 is designed to delineate and de-risk two board petroleum play fairways with the aim of identifying a high-grade, multi-target prospect for drilling.
Neon managing director Ken Charsinsky said the second farm-out transaction with KrisEnergy put the company in an excellent position to carry out its seismic campaign across both Vietnam blocks in the coming months.
“Vietnam has recently emerged as a significant investment destination for E&P companies as evidenced by the recent country entry by ExxonMobil,” he said.
“The potential for discoveries in the range of 50-500 million barrels presents a very significant opportunity for an emerging company such as Neon Energy.”
Charsinsky added that the farm-out transactions would increase Neon’s cash reserves and reduce the company’s 2010 financial commitments by around$US5.475 million.
The farm-out is subject to approval by the Vietnamese government and waiver of the pre-emptive rights of Petrovietnam.
Once the farm-out is complete, Neon will hold a 50% interest, KrisEnergy will have 40% and Enovation Resources will have the remaining 10%.
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