Sagres Energy Inc.

Sagres Energy Inc.

December 05, 2011 09:30 ET

Sagres to Acquire Low Risk Appraisal Asset in the Llanos Basin of Colombia

CALGARY, ALBERTA--(Marketwire - Dec. 5, 2011) - Sagres Energy Inc. (TSX VENTURE:SGI) ("Sagres" or the "Company"), an international oil and gas exploration company with an exploration portfolio in Colombia, Guyana and Jamaica, announced today that it has signed a purchase and sale agreement with Assam Company India Limited ("Assam") to acquire all of Assam's right to earn a participating interest in the Agencia Nacional de Hibrocarburos ("ANH") Hydrocarbon Exploration and Production Agreement (the "E&P Agreement") for the El Triunfo Block (the "Block") in Colombia currently held 100% by Union Temporal El Triunfo ("UTE").

The El Triunfo Block, Llanos basin, Colombia

The Block is comprised of 25,205 gross acres in the oil-rich Llanos Basin in the Department of Casanare, Colombia. The Llanos basin is located towards the northern end of the long series of Sub-Andean basin extending from Argentina to Venezuela along the eastern side of the Andes Mountains.

The Block contains an undeveloped discovery well, La Cabana-1, that was drilled in 1984, on the flank of the 3D seismically defined San Sebastian prospect, and tested 736 bopd with water from the Mirador Formation and 338 bopd with no water from the Gacheta Formation, however was not put on production due to mechanical reasons. To date, there has been no commercial production on the Block; however, there are several undrilled prospects that have been identified on 3D seismic. Sagres anticipates drilling the first well in the second quarter of 2012 offsetting La Cabana-1 on its San Sebastian prospect with the second well to be drilled immediately thereafter.

Sagres to acquire new operational team in Colombia

Sagres will assume Assam's operations in Colombia including an office in Bogota with a small operational staff. Heading up the office for Sagres is Mr. Wade Spark who will assume the position of General Manager, Colombia. Mr. Spark is a petroleum engineer with extensive experience in Colombia with previous senior roles at Nexen Inc., Petrominerales Ltd. and Petroamerica Oil Corp.

Mr. Gary Wine, President and CEO of Sagres stated that "The acquisition of this asset provides a low-risk appraisal opportunity with near-term production potential for Sagres. In addition we have identified several attractive multi-zone exploration prospects on 3D seismic to provide for future growth potential beyond the existing discovery. This represents the first transaction with the new management team which was announced in late May 2010 and reinforces the Company's new focus in South America. Furthermore, I am very pleased to be bringing into the team, Wade Spark, who will be instrumental in spearheading Sagres' further expansion in Colombia."

About the Acquisition

Pursuant to the terms of the E&P Agreement, the participating interest holders are required to drill two further exploration wells. Under the terms of certain private participation agreements with the other participating interest holders in the Block, Sagres will earn an undivided 70% participating interest and assume operatorship in the Block by paying 100% of the costs relating to the first of the two wells, including but not limited to land purchase, payment of easements, civil construction for the location and access road, drilling platform, drilling of the well to the required depth, initial testing of the well and social and environmental investment in accordance with the E&P Agreement. The estimated costs relating to such well are estimated to be US$12,000,000. Upon satisfaction of the work commitments associated with the first well, and subject to the approval of the ANH of assignment to Sagres, Sagres will have a 70% participating interest in the E&P Agreement and be the recognized operator.

At the election of its participating interest partner, UTE, Sagres has the right to earn an additional participating interest in the Block by funding its partner's 30% share of the work commitment costs associated with the second of the wells. Depending upon the outcome of the first well, the increased participating interest could vary between 5 and 12.5%. The estimated costs relating to the second well are also estimated to be US$12,000,000. Subject to the approval of the ANH, Sagres may be entitled to a further assignment of a participating interest. Once the work commitments and costs associated with the wells are fulfilled, Sagres must pay its participating interest proportionate share of all further costs associated with the E&P Agreement. The purchase price for the Acquisition is US$2.5 million (subject to certain customary closing adjustments), payable in staggered cash increments. An additional US$2.5 million payment is payable in cash or shares of Sagres upon declaration by the ANH of a commercial discovery on the Block. Following closing of the acquisition, Sagres will fund it pro-rata share of a letter of credit required under the terms of the E&P Agreement in the amount of approximately US$840,000 to guarantee the completion of the work obligations thereunder.

Closing of the proposed Acquisition is subject to customary closing conditions, including the receipt of the approval of the TSX Venture Exchange and all other necessary regulatory approvals. The Company does intend to procure an independent evaluation of the Block conducted in accordance with National Instrument 51 101 - "Standards of Disclosure for Oil and Gas Activities" and the standards contained in the Canadian Oil and Gas Evaluation Handbook.

About Sagres

Sagres Energy Inc. is a Canadian based international oil and gas exploration company with an exploration portfolio in Colombia, Guyana and Jamaica. The common shares of Sagres are listed for trading on the TSX Venture Exchange under the symbol "SGI".

Regulatory Statements

This press release contains "forward looking information" within the meaning of applicable Canadian securities legislation. Forward looking information includes, but is not limited to, statements with respect to the acquisition of the Block; costs associated with the acquisition; the potential of the Block; and the employment of the General Manger, Colombia. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, geopolitical and social uncertainties; the actual results of exploration activities; regulatory risks; risks inherent in foreign operations; and other risks of the oil and gas industry. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.


Contact Information

  • Sagres Energy Inc.
    Gary Wine
    President & CEO
    (403) 441-1129