Tunisia: Dragon Oil Signs Farm-In Agreement with Cooper Energy

Dragon Oil plc, an international oil and gas exploration, development and production company, announces that it has signed a farm-in agreement with a wholly owned subsidiary of Cooper Energy Limited through which Dragon Oil is to earn a 55% participating interest in and, in any development phase, assume operatorship of the Bargou Exploration Permit, offshore Tunisia.

The Bargou Exploration Permit is located in the Gulf of Hammamet in the Mediterranean Sea. The Permit covers an area of 4,616km2 with predominantly offshore exploration prospects and leads in water depths of approximately 50 to 100 metres.

Dragon Oil is to earn a 55% participating interest in the Bargou Exploration Permit by paying 75% of the cost to drill the Hammamet West-3 well in the Hammamet West Oil Field (the “Field”), according to an agreed well plan scope, up to a cost cap of US$26.6 million (on a 100% basis). If the well cost exceeds US$26.6 million, costs in excess of this amount will be shared among the joint venture partners pro rata to their participating interest. The well plan consists of a pilot hole followed by a horizontal section to intersect the fractures within the Abiod formation thereby increasing the flow potential of the reservoir. This well is expected to be drilled in 2012.

The Field is located in the northern part of the permit and covers 205km2 in water depths of approximately 50 metres. 3D seismic data of this field was acquired in 2009-10. The farm-in is subject to approvals by the Government of Tunisia and the joint venture partners and to completion of further due diligence by Dragon Oil.

Following completion of the farm-in conditions, the Bargou Joint Venture will comprise Dragon Oil (55%), Cooper Energy (30%) and Jacka Resources (15%). If the Hammamet West-3 well is successful and the Joint Venture proceeds with development of the Field, Dragon Oil will assume operatorship of the Bargou Exploration Permit subject to confirmation from the Government of Tunisia. In the case of a development phase, Dragon Oil will carry Cooper Energy in an amount equal to approximately US$5 million (subject to audit) to compensate them for pro rata past costs, after which all parties will pay their participating interest share for any development costs.

Dr Abdul Jaleel Al Khalifa, Chief Executive Officer, Dragon Oil plc, commented:

“Dragon Oil is pleased to announce a farm-in agreement with Cooper Energy in the Bargou Permit, which in addition to testing the Hammamet West Oil Field with the Hammamet West-3 well, offers exploration upsides through a number of additional independent prospects and leads. This farm-in is part of our plan to build a portfolio of development and exploration opportunities in order to grow the Group into a multi-asset company. We believe our experience offshore Turkmenistan with complex and challenging reservoirs will be useful in better understanding, appraising and developing the Hammamet West Oil Field. We look forward to the opportunity of working in Tunisia.

“We continue to search for new projects where we can deploy our technical and operational expertise in key regions of interest, including Africa, Central Asia, the Middle East and selectively south-east Asia.”

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Source: Dragon Oil, October 11, 2011; Image: Cooper Energy