QGEP Participações has completed two separate farm-out agreements, one with ExxonMobil and one with Murphy Oil in the Sergipe Alagoas Basin.
The farm-out agreements are for Blocks SEAL-M-351 and SEAL-M-428. Additionally, QGEP and its partners have been awarded blocks SEAL-M-501 and SEAL-M-503 in Brazil's 14th Bidding Round.
The farm-out agreements relate to the blocks that a QGEP subsidiary was awarded in the ANP’s 13th Bidding Round, in October 2015. The blocks are 100%-owned by QGEP, and are in ultra deepwaters in the Sergipe-Alagoas Basin, 80-100km offshore Brazil and cover a total 1512sq km.
Under the terms of the farm-out agreements, QGEP will retain a 30% working interest and ExxonMobil and Murphy Oil will acquire 50% and 20%, respectively. QGEP will be reimbursed for 70% of the R$100 million signature bonus that it paid to acquire the blocks.
Additionally, QGEP will be fully reimbursed for seismic costs related to the blocks, among other considerations. The seismic costs have been estimated at US$15 million, most of which has been earmarked for the company’s 2018 capital expenditure program.
“These farm-out agreements are aligned with our strategy of retaining the upside potential of a diversified exploratory portfolio, while maintaining a disciplined approach to capital spending,” said Lincoln Guardado, QGEP CEO. “Sergipe-Alagoas is a well established basin with oil and gas production from onshore, shallow and deepwater wells and is recognized as a low risk exploration area. This transaction confirms the soundness of our decision to purchase these blocks during a very difficult period for the Brazilian oil and gas industry.”
QGEP and its partners ExxonMobil and Murphy Oil also acquired Blocks SEAL-M-501 and SEAL-M-503 in the 14th ANP Bidding Round. The blocks are adjacent to SEAL-M-351 and SEAL-M-428.
The total signature bonus for these exploration blocks was R$109,9 million or R$33,0 million net to QGEP. The consortium is also committed to acquire seismic data for the blocks.
“We are pleased to be partnering with ExxonMobil, the world’s largest publicly traded international oil and gas company, who will be the operator with a 50% interest in the blocks, and Murphy Oil, a large independent oil and gas company, with a 20% working interest. The quality and expertise of this partnership guarantees the use of best industry practices in this challenging operating area. We believe that QGEP is very well positioned to benefit from the improved industry environment, as well as the relationships we are developing with these new partners,” Guardado added.
The farm-out transaction is subject to ANP and CADE’ approval.