Indonesian firm to fund Yemen drilling program

Indonesia-based PT Bumi Modern entered an arm's-length letter of agreement to fund all of the costs of a drilling and testing program and related costs on Block R-2 in the Republic of Yemen in exchange for up to 59% of the outstanding stock of Pertacal Energy Inc., Calgary. A formal contract is expected to be signed shortly.


Indonesia-based PT Bumi Modern entered an arm's-length letter of agreement to fund all of the costs of a drilling and testing program and related costs on Block R-2 in the Republic of Yemen in exchange for up to 59% of the outstanding stock of Pertacal Energy Inc., Calgary. A formal contract is expected to be signed shortly.

Pertacal owns a 50% interest in Block R-2. Bumi will spend an estimated $16 million on the project.

Terms of the agreement call for Bumi to drill a total of 6 wells, comprising 2 conventional wells and 4 slim hole wells, to be drilled and tested at an estimated cost of $8 million (US). The cost of drilling the wells will be conducted under a turnkey arrangement and will be $2.2-2.3 million for the conventional wells and $500,000-600,000 for the slim hole wells. Testing operations, if required, will be $700,000/well, also under turnkey conditions.

The block development program also will involved expenditures of about $8 million on acquisition and processing of 285 km of seismic data, operational and administrative work, and bonus payments to the government of Yemen. Pertacal will pay these costs.

Each time a well reaches total depth and is logged and abandoned or determined to require testing, Pertacal will issue shares to Bumi. Earnings also will be accumulated when testing operations, if required, are completed.

Pertacal will issue Bumi a maximum of 80.7 million common shares, resulting in Bumi earning 59% of the outstanding stock of Pertacal when the drilling and testing programs have been completed and all nondrilling costs have been paid.

This arm's-length agreement with Bumi replaces Pertacal's previous separate agreements with Bumi and Pertamina. Both of those agreements expired without the negotiation of or entering into of a formal agreement, says Pertacal. Negotiations are continuing between Pertacal, Bumi, and Indonesian state firm Pertamina for the provision of turnkey drilling services by Pertamina to the proposed venture on Block R-2 on a nonequity basis, says Pertacal.

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