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New World Oil and Gas has signed a farmout agreement with ThermaSource International LLC for its Blue Creek project in the producing Petén basin in northwest Belize. This will result in substantial savings in drilling costs while minimizing dilution, and allow the company to retain as much of the upside potential as possible.
New World’s farmout will result in a 25% reduction in the daily drilling rate in return for a 5% participating interest in each well drilled on the three prospects identified on the Blue Creek project. The company has the option of buying back their 5% participation in each well at market price within 18 months of the declaration of commerciality of any well at a value established by an agreed third party reserve auditor.
The company has also signed a contract with ThermaSource to commence drilling in October 2012 at the BCrest prospect at Blue Creek that has un-risked P50 prospective resources of 92 million barrels of oil.
ThermaSource will drill one well, with the option of a second and third well. Mobilization of the drilling rig will start immediately, with drilling operations set to begin in October 2012
New World’s CEO William Kelleher, said, "The farmout agreement and drilling contract with ThermaSource are significant milestones in the development of New World as a leading, diversified oil and gas exploration company, and we are delighted to announce that we are on target to commence drilling at Blue Creek in October 2012. Not only is this a hugely important step for the company, it also allows us to cut drilling costs by up to another 25% while only farming down a 5% working interest in each well of our highly prospective project, rather than the entire production sharing agreement.”