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Colombia's hydrocarbons regulator ANH has approved Sintana Energy's (TSX-V: SNN) subsidiary Patriot Energy Oil & Gas' amendment with ExxonMobil Exploration Colombia on the 43,000 acre (17,402ha) VMM-37 block in the Middle Magdalena basin, according to a Sintana release.
The amendment will allow Patriot to assign 70% of participating interest, rights, and obligations and the operations of the unconventional project to ExxonMobil.
ExxonMobil will help with the exploration and development of the unconventional oil and gas resources and pay 100% of exploration Phase I well costs for the first three wells. Phase I should start in the third quarter of 2013, and ExxonMobil will pay a consideration to compensate Sintana for past expenses from the block.
ExxonMobil will also have the option to proceed with the next phase of the unconventional project, paying 100% of the costs, up to US$45mn. According to the release, ExxonMobil would "recoup" US$10mn from 50% of Patriot's production proceeds.
Patriot will retain the remaining 30% participating interest in the unconventional resources as well as its 100% participation interest in the conventional resources overlying the top of the unconventional interval, according to the release.
Last year, Sintana entered into a farm-out agreement with ExxonMobil for the exploration and development of unconventional oil and gas resources at block VMM-37.
The cost of unconventional E&P has been the main challenge to Sintana's growth in Colombia.
Sintana holds 30% private participation interest in Talora bock, 30% in the COR-39 & COR-11 blocks, and 25% carried private participation interest in the VMM-4 and VMM-15 blocks, all located in the Upper Magdalena basin. The company holds a 25% private participation interest in the LLA-18 block in the Llanos basin.