Cygam Energy Inc.

Cygam Energy Inc.

December 17, 2009 09:00 ET

Cygam Completes Farmout to Drill the Offshore Elsa-2 Well in Italy in 2010


Cygam Energy Inc. ("Cygam" or the "Corporation") is pleased to announce that its wholly owned subsidiary, Vega Oil S.p.A. ("Vega"), has signed a Farmout Agreement ("the Agreement") with Petroceltic International plc. ("Petroceltic") for the B.R268.RG permit ("the Permit") located in the Adriatic Sea, offshore Italy.

Prior to the signing of the Agreement, Vega held a sixty percent working interest (60%) in the Permit, inclusive of a twenty percent (20%) free carried interest in the drilling of the first exploratory well on the Permit.

Under the terms of the Agreement, Petroceltic has agreed to pay one hundred percent (100%) of well costs for the proposed Elsa-2 well ("the Well") and Vega has agreed to transfer to Petroceltic a thirty per cent (30%) participating interest in the Permit. The transfer will be completed on the following terms: the assignment of a ten per cent (10%) participating interest in the Permit to become effective once all long-lead items required to drill the Well have been ordered; and the assignment of the remaining twenty per cent (20%) participating interest in the Permit upon spudding of the Well on or before October 31, 2010, subject to any extensions granted by Italian Government authorities and consented to by Vega and Petroceltic.

Upon the assignment of the interest and successful completion of the Elsa 2 well, Vega and Petroceltic will participate in the future development, rights and obligations of the Permit in accordance with the following participating interests: thirty percent (30%) for Vega and seventy percent (70%) for Petroceltic.

Vega and Petroceltic have also agreed that, from the effective date of the Agreement, de facto operatorship of the Permit shall be transferred from Vega to Petroceltic and Petroceltic shall become the operator with respect to all operations conducted in relation to the Permit under the Elsa Joint Operating Agreement ("the Elsa JOA").

In consideration for receiving the assignment and the transfer of operatorship, Petroceltic agrees to perform all well operations and to pay all exploration costs related to the Permit and all costs of well operations under the Elsa JOA, including coring and logging, prior to the potential setting of a final production casing in the Well. Exploration costs shall also include the costs of any potential drill stem test in the Well and all abandonment costs if final production casing is not set.

In respect of work to be carried out after casing the Well, Vega and Petroceltic agree to pay their participating interest share of costs incurred in relation to such work, including all costs associated with production testing the Well, all completion and post-completion costs incurred in relation to the Well and all future development cost for the Permit.

It is expected that drilling operations at the Elsa-2 site will commence in October 2010, subject to rig availability. The Well is scheduled to be drilled to a total depth of 4700 metres using a jack-up rig, at a location approximately 7 km from the coast line in water depth of approximately 33 metres. The Well is expected to cost approximately US$40 million.

Petroceltic is a Dublin, Ireland, based company, listed on the AIM London Stock Exchange, with exploration permits in Italy, Algeria and Tunisia. The Spanish utility company, Iberdrola, is a major shareholder. By entering into this Agreement, Cygam's management is satisfied that Petroceltic has the necessary resources and capability to carry out drilling and evaluation of the Elsa-2 well.

Cygam is a Calgary based exploration company with producing properties in Canada and Tunisia and an extensive portfolio of international exploration permits. The main focus of the Corporation is the acquisition, exploration and development of international oil and gas permits, primarily in Italy, Tunisia and the Mediterranean Basin. Cygam currently holds various interests in six exploratory permits in Italy and four exploratory permits in Tunisia encompassing approximately over 3.5 million gross acres (approximately 1.8 million net acres before pending farm-outs). Visit the Cygam website at for more information about Cygam.

This News Release includes certain "forward-looking statements". All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding interpretation of seismic and well data, future plans and objectives of Cygam Energy Inc., are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated or expected in such statements. Cygam does not undertake any obligations to update forward-looking statements except as required by applicable securities laws. In particular, there is no assurance that the well will be drilled as scheduled. As well, various factors can cause delays or prevent the operator from carrying out drilling, production testing and development programs as scheduled, including but not limited to unavailability of equipment, funding and manpower or delays in the operations planned for the B.R268.RG permit due to lack of Government approvals. Actual costs could be different from those estimated. There is no certainty that a well will be drilled, or that hydrocarbons will be discovered in commercial quantities on the permit. Important factors that could cause actual results to differ materially from Cygam's expectations are risks detailed herein and from time to time in the continuous disclosure filings made by Cygam with securities regulators on the System for Electronic Document Analysis and Retrieval (SEDAR) at

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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