Oracle Energy Corp. has entered into an option agreement with Yemen Mayfair Petroleum Corp. (YMPC) to acquire an additional 8% interest in the expansive Block 22 exploration concession in the Republic of Yemen. As consideration for the option the Company will pay YMPC 200,000 Oracle common shares. This option agreement allows Oracle the right to more than double its participating interest in Block 22 from 7% to 15%. The option agreement is subject to TSX Venture Exchange approval.
Oracle President Nasim Tyab says that this new option agreement offers the Company considerable leveraged exposure to the "company maker" potential of the 8,151-square-kilometre Block 22 exploration concession, situated within Yemen's hydrocarbon-rich Tihama Basin. "With our initial focus on the Beta Prospect within Block 22, the joint venture partnership's initial October drill program is targeting multiple potential pay zones with the potential for world-class discoveries," he says. "If the Beta drill program is successful, we have also identified at least four other prospects or leads on Block 22 that would merit further evaluation and which could provide additional potential oil reserves."
Block 22 was awarded to YMPC in 1993. Notably, principals of YMPC were instrumental in the discovery of Yemen's first giant oil field in the mid-1980s, located in the Marib Basin.
Prior to acquiring its initial 7% participating interest, Oracle commissioned an independent technical evaluation report by UK- based Merlin Energy Resources. The table below is an excerpt from the Merlin Report and lists the potential reserves in only one of the potential pay horizons. Merlin has mapped a total of four horizons referred to as blue, orange, yellow and magenta.
Oracle may exercise its option to acquire the additional 8% interest by paying YMPC US$560,000 by October 15th 2005 and by assuming 8% of past exploration costs incurred on the block which equates now to US $1,449,696. Past costs are to be paid over time following completion of a positive test well. The US$560,000 paid to YMPC will be added to Oracle's contribution towards the drilling, testing, and completion of the Beta -1 Well, scheduled to be drilled mid-October 2005. Oracle will be credited for and entitled to receive its pro-rata share of any deductions or cost allowances allowed pursuant to the Production sharing agreement (PSA) with the Yemen government. Oracle will also share with YMPC, on a pro-rata basis, all rights and considerations entitled by YMPC pursuant to the PSA.
Oracle Energy presently holds a 7% participating interest in Block 22. The cost to the Company for its 7% participating interest is $700,000, which has already been paid. This also includes the assumption of 7% of past costs incurred on the exploration block, equating to US $1,155,000. Past costs are to be paid over time following completion of the first 8,000 foot exploratory well.