Addax Petroleum acquires major interest in exploration block offshore Nigeria
  by: OilOnline
  Friday, October 20, 2006

Addax Petroleum Corporation has entered into a farm-out agreement with Starcrest Nigeria Energy Limited, pursuant to which Addax Petroleum and Starcrest have signed a Production Sharing Contract with Nigeria National Petroleum Corporation in respect of Oil Prospecting License ("OPL") 291 deepwater offshore Nigeria. Addax Petroleum has a participating interest of 72.5 per cent and is the operator. Commenting on signing the PSC Jean Claude Gandur, President and Chief Executive Officer of Addax Petroleum said, "The addition of OPL291 to our deepwater exploration portfolio is truly exciting. The highly prospective nature of the property is underlined by its proximity to the nearby world-class Agbami oil field which is currently under development. We believe that OPL291 offers significant potential to our company and its shareholders." OPL291 represents the mandatory relinquishment area of OPL216 following conversion of OPL216 to Oil Mining Lease ("OML") 127 preceding the development of the Agbami field in OML127 by Chevron. OPL291 was tendered by the Nigerian government under the 2006 mini bid round and was recently awarded to Starcrest. Pursuant to the PSC, Addax Petroleum and Starcrest (i) shall pay a PSC signature bonus to NNPC of US$55 million, (ii) shall undertake an initial investment of US$75 million covering an initial work commitment which comprises the acquisition of 3D seismic and drilling one well and (iii) have entered into a Memorandum of Understanding with NNPC to undertake an investment in an Independent Power Project ("IPP") which would be developed with gas from a commercial development in OPL291 and agreement with NNPC on the technical and commercial arrangements should the IPP proceed.

Pursuant to the farm-out agreement, Addax Petroleum is obligated: - to pay to the Nigerian government, 100 per cent of the OPL291 PSC signature bonus of US$55 million; - to pay to Starcrest, a farm-in fee of US$35 million; and - to pay Starcrest's share of OPL291 exploration and development costs which will be reimbursed to Addax Petroleum from Starcrest's share of production revenues from OPL291.

OPL291 is located approximately 130 kilometres off the Nigerian coast, where the water depth ranges from approximately 1,000 to 2,300 meters and covers a gross area of 1,287 square kilometers (318,000 acres). OPL291 is immediately adjacent to OML127 (to the east) which contains the Agbami and Ikija fields, operated by Chevron and OPL242 (to the west) operated by Devon Energy.