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Sintana Energy (SNN) has entered into a farm-out agreement with US oil major ExxonMobil (NYSE: XOM) for the exploration and development of unconventional oil and gas resources in Colombia's Middle Magdalena basin, Sintana said in a statement.
The agreement, signed between Sintana's wholly owned subsidiary Patriot Energy Oil & Gas and Exxon's local subsidiary ExxonMobil Exploration Colombia, involve resources underlying in the VMM-37 block in the basin.
Subject to approval by Colombia's hydrocarbons regulator ANH, ExxonMobil will acquire a 70% participation interest and operatorship in the formations defined as unconventional by completing the work program.
Patriot will retain the remaining 30% interest in the unconventional play as well as its current 100% participation interest in the conventional resources.
ExxonMobil will pay 100% of all exploration phase I well costs, which includes three wells. Drilling operations are expected to start in 3Q13.
ExxonMobil will have an option to proceed to the next phase. In this development phase, it will pay 100% of all additional costs to a maximum of US$45mn, of which US$10mn will be recouped by ExxonMobil from 50% of Patriot's production proceeds.