Apache Corp. has taken a farmout from TAG Oil Ltd., Vancouver, BC, and will explore three New Zealand East Coast basin permits that total more than 1 million prospective acres.
Apache will earn as much as half of TAG Oil’s 100% working interest in PEPs 38348, 38349, and 50940 on the southeastern North Island. PEPs 38348 and 50940 lie northeast of Hawke Bay, and 38349 is south of the bay. The blocks are considered to hold shale oil and conventional targets (OGJ, Aug. 6, 2007, p. 37).
Apache will pay part of TAG’s direct costs to date and carry TAG on three phases of operations to a maximum agreed cost in each phase. If the agreed cost is exceeded in any phase, or if additional operations are conducted, Apache will pay a majority share of any drilling or seismic costs in the specified percentages set out in the agreement.
Each phase will include an aggressive program of 2D and 3D seismic and drilling with Apache earning an increasing interest in the permits.
Apache in Phase 1 will earn a 50% interest in 5,120 acres of the permits after operations are conducted and by committing to Phase 2. In Phase 2, it will earn a 25% interest in the permits after operations are conducted and by committing to Phase 3. In Phase 3 it will earn a 50% interest in the permits after operations are conducted and by committing to Phase 4 operations.
Subject to certain conditions, the planned exploration work program will be conducted over the next 4 years. Seismic is to start in 2011 and drilling in 2012.
Apache will be operator for all activities, excluding the initial four vertical wells of the work program that TAG will operate with Apache’s assistance. Apache will spend up to $100 million upon completion of Phase 3 to earn a 50% interest in the permits. At the end of Phase 3, TAG will remain as operator.
If Apache commits to Phase 4 operations, the two firms will share costs equally going forward.