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Troy Energy Corp. has entered a binding letter of intent with Coban Petroleum Ltd., which has agreed to farm out a portion of its rights, entitlements, interests, and obligations in the Guatemala production-sharing agreement (PSA).
The oil and gas PSA covers approximately 1,740 sq km (672 sq miles) in the Coban region of Guatemala. The area has had seismic work and one exploration oil well drilled, which last produced in July 1988.
As part of the deal, Troy will fund a two-well program, together with the re-entry and workover of a previously producing well (San Diego No. 1).
Troy will earn a 92% before payout working interest (switching to a 63.75% working interest after payout) in the license lands. That will come in exchange for settling various payments upon closing, incurring obligations for certain additional post-closing payments to the government of Guatemala and other private parties, funding 100% of the costs of the first well, and the workover ,
Equivalent percentage interests will be earned in respect of the second well . The letter of intent also provides that a formal farm-out agreement with standard industry representations, warranties, covenants, and conditions will be entered between the parties within 30 days of execution of the letter of intent.
The letter of intent calls for the completion of a private placement for minimum aggregate gross proceeds of US $10 million.