Pennine Petroleum has announced that it has signed a Production Sharing Agreement ('PSA') with Albpetrol for the exploration and development of the Velca Block in Albania.
The finalized PSA contains a license agreement signed by Pennine, Albania’s Ministry of Energy and Industry, and Albpetrol, the country’s state-owned energy firm, for a six-year exploratory lease - convertible to a 25-year production lease, upon discovery of oil and/or natural gas accumulations.
'This is a very exciting day for Pennine. Albania has a long history of oil and gas development dating back nearly a century, and Pennine is excited to bring its expertise to this region' says Chief Executive Officer N. Desmond Smith.
'Albania has mature energy infrastructure, established legislation and regulations, and a recent history of significant foreign investment for the development of its energy sector,' adds Mr. Smith. 'We look forward to working in the Republic of Albania, providing value to Pennine shareholders, and bringing prosperity to the people of Albania.'
Pennine intends to initiate a Technical Report in the next 60 days, and with existing data, identify potential drilling targets within the Velca Block. Pennine is currently working with industry experts from Albpetrol and the Ministry of Energy and Industry in an advisory committee, with Pennine acting as operator.
'Our understanding and experience with Albania has enabled us to develop a partnership with the Albanian government and Albpetrol through a new production sharing agreement. We believe this agreement provides a balanced risk-and-reward contract for the exploration and development of the Velca Block - and, we hope, many other opportunities in Albania,' says Pennine chairman Richard Wadsworth, who led Bankers Petroleum in re-developing the Patos Marinza oilfield as its president from 2004 through 2008. 'We look forward to a seamless integration of Pennine into Albania’s oil and gas exploration and development landscape.'
The PSA consists of an Exploration Phase and a Drilling Phase. Under the Exploration Phase, Pennine and Albpetrol will conduct an examination of all currently existing geological, geophysical and well data on the Velca Block, and conduct any processing or re-processing of data to select drilling targets. The Drilling Phase will consist of a commitment to drill a minimum of two (2) wells, to a minimum depth of 2,500 metres.
Pennine will recover all exploration and development costs from 90% of the net operating revenue, after the state’s 10% royalty tax, then subject to an R-factor revenue sharing with Albpetrol, ranging from 2% to 15% of net operating revenue, depending on the multiple of cost recovery to the project. After payout of all costs, the interest in the revenue stream is shared, with 50% earmarked for the Albania Ministry of Energy and Industry and 50% for the participants of the PSA (a 100% working interest before payout and a 50% working interest after payout).
Main terms and conditions of the Velca Block PSA were signed in February 2016. Pennine and Albpetrol agreed in April 2016 to the terms of the PSA and submitted the document to Albania’s Ministry of Energy and Industry for approval. Pennine reviewed the License Agreement, an integral component of the PSA, in December 2016.
In connection with this transaction, Pennine will pay a finder’s fee to an arm’s-length entity through the issuance of up to 7,000,000 common shares subject to TSX Venture Exchange policy.
For more information, please visit: http://www.penninecorp.com For additional information on this project, please visit our ProjectsOGP database