New World Oil and Gas (LON:NEW) announced their first project in Belize, Blue Creek, just 36 days after listing on AIM back in May 2011. Ever since then, the company has undergone a thorough process of de-risking the 420sq Km project through seismic activity and reinterpretation of existing data.
The original agreement, with Blue Creek Exploration Ltd (BCE), meant that NEW had obligations to drill two wells to the Jurassic to earn 32.5% each, bringing the total working interest to 100%, with a 5% overriding royalty, after already being assigned 35% for the 231 Km lines of 2D seismic undertaken.
Under the new and improved farm-out agreement terms, NEW will earn into a 100% working interest after completing three wells through the base of the Yallback Formation to 5,500ft as opposed to two previously targeting the Hillbank and Margaret Creek Formations at 11,300ft. The Yallback formation is the most prospective compared to nearby producing fields and contains all the estimated gross P50 volumetrics of 294MMbbl which RPS Energy reported an Expected Monetary Value (EMV10) of US$1.51bn and total success case combined discovery NPV10 US$9.1 billion.
Not only is the thought of starting oil production early, if successful, great for NEW shareholders but the company has also cut drill costs by a third! NEW can now meet their 100% farm-out obligations for US$13.5 million as opposed to an estimated US$20 million. Not a bad saving when you consider the market capitalisation of the company is just £28.5 million @ 11.75p.
If commercial quantities of oil are discovered in one or more of the three wells, they will be put on test and into early production for the purposes of generating early cash flow which will be used to drill a forth well 200 ft below the Margaret Creek formation.
New World Oil and Gas are holding an investor relations evening on the 3rd July at the Geological Society in Piccadilly, London. To register for a place please click here
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