Esrey Announces Farm-In Agreement With Heritage Oil in Papua New Guinea

Esrey Energy said that its subsidiaries, Telemu No. 18, LNG Energy (PNG) and LNG Energy No. 2, have entered into an amendment to their farm-in agreement with wholly owned subsidiaries of Heritage Oil in Papua New Guinea.

In exchange for extension of the deadline to spud the first exploration well from October 1, 2014, to December 31, 2015, the Farm-in Agreement has been amended to provide that:

• The Company will receive a further cash payment of US$2,500,000 within 14 days;
• Heritage will now carry Telemu for 30% of the cost of a second exploration well (in which Telemu holds a 20% participating interest) in the event that a second well is drilled; and
• Heritage will fund 100% of any joint operating costs incurred after the fulfillment of its obligations under the Farm-in Agreement in respect of the first exploration well until the earlier of the spud of the second exploration well or the 180th day following the date of testing and suspension or abandonment of the first exploration well.

“This modification provides Esrey with additional cash and funding coverage with which to meet future obligations and will provide Heritage with some operational flexibility and potential cost savings to efficiently carry out the required earn-in work program. Heritage has completed acquisition of approximately 230 km of 2D seismic across the licenses and we look forward to continuing our partnership with Heritage through the forthcoming drilling to be undertaken on the PPL 319 license,” commented David Nelson, President & CEO of Esrey.

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Press Release, June 3, 2014