Blacksands Pacific Acquires Interest in OPL 2012 Block, Offshore Nigeria

The Blacksands Pacific Group, Inc including affiliates and subsidiaries  announces that it has entered into an Agreement  with Sigmund Oilfields Limited  and Grasso Consortium consisting of Grasso Nigeria Limited, Oil and Gas Mission Limited and Eurafric Energy Limited for the development of the leased acreage OPL 2012.

OPL 2012 is located Offshore Niger Delta, in shallow waters between 50 and 100m, within a highly prospective zone bordered by Shell’s HD field to the northwest, NNPC’s Agbara field to the west, several oil and gas discoveries of Addax to the south, H1 field of Sunlink to the west and JK Field of Shell to the north.

Background

Blacksands Pacific extends its indigenous partnership in Nigeria by executing an agreement with Sigmund, to jointly explore, develop and produce from the OPL 2012 (“2012”). Under the terms of the farm-in (“participation”) agreement with Sigmund Oilfields, Blacksands Pacific as Joint Operator, technical and financial partner will acquire 40 per cent equity and legal interest with an effective 60 per cent economic interest (subject to gross volumes lifted). Blacksands Pacific has undertaken to fund 100% of the work program.

The Oil Prospecting Lease Block 2012 was awarded to GRASSO Consortium consisting of Grasso Nigeria Limited, Oil and Gas Mission Limited and Eurafric Oil field Limited. The consortium transferred 84% ownership of the OPL Block 2012 to Sigmund Oilfield Limited.

As the Joint Operator and financial partner, Blacksands Pacific will be responsible for the development of OPL 2012 and will be responsible for 100% of Working Interest by providing the required CAPEX funding and technical expertise for the exploration, appraisal, development and production of hydrocarbons (including drilling and mining activities) within OPL Block 2012, which includes satisfying the required regulations for converting the Block to an Oil Mining License (OML).

Forward work Program

The near-term work program will consist of:

Payment of the statutory signature bonus to the Department of Petroleum Resources for the Oil Block No. OPL 2012 and payment of farm-in fees to Sigmund Oilfields Limited and the Grasso Consortium.

Commence negotiations of the Production Sharing Contract (“PSC”) with the Department of Petroleum Resources in Nigeria together with Sigmund Oilfields Limited and Grasso Consortium.

As part of the Production Sharing Contract “PSC” negotiation(s), the unitization of the Agbara Field in which reservoir straddles between the OPL Block 2012 and the Oil Mining Lease (OML) Block 116 operated by AGIP/ ENI will also be negotiated. Blacksands Pacific and partners with the involvement of the Department of Petroleum Resources will complete the unitization negotiation(s), agreement(s) and documentation on the Agbara field.

In addition to the signature bonus and farm-in fees, Blacksands Pacific will also invest approx USD$215m into the Phase I development of the OPL Block 2012 and the cost recovery for such investment will be from hydrocarbon produced.

Mean recoverable reserves from the OPL Block 2012 at P50 is estimated at 385.60 MMBO for (100% Oil), 96.40 MMBO for (50% Oil) and 1.55 TCF for (100% Gas), 387.80 BSCF for (50% Gas), there are also 8 prospects identified within the Block. Presently, part of the OPL Block 2012 is in the exploitation phase, whereas the remainder of the block is at the exploration and development phase.

Commercial terms

The agreement executed between Blacksands Pacific and Sigmund Oilfields defines the commercial terms under which Blacksands Pacific through its International subsidiary (Blacksands Pacific International Limited including subsidiaries) will participate in the exploration, development and production from the leased area covered by the Oil Prospecting Lease Block 2012 (pursuant to the execution of a Participation Agreement, Joint Operating Agreement, and the completion of the Production Sharing Contract “PSC” with the Department of Petroleum Resources) and provides for Blacksands Pacific to acquire a 40 per cent legal and beneficial (“equity”) interest in OPL 2012 with 60 per cent. economic interest (subject to requisite approvals).

Pursuant to these agreement(s), Blacksands Pacific will fund 100 per cent of the costs of the proposed work program. The funding will be provided in 2 tranches with the initial tranche utilized as required for the unitization of the “Agbara Field” and the subsequent tranche(s) for continuing the exploration, development and production from the OPL Block 2012. Blacksands Pacific will be entitled to 60 per cent. of net field revenues (subject to gross volumes lifted). The conclusion of the partnership (farm-in) is subject to satisfactory conclusion of diligence by Blacksands Pacific and its appointed bankers.

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Source:The Blacksands Pacific Group ,September 13, 2011;