The Board of Mediterranean Oil & Gas Plc (AIM: MOG) is pleased to announce that it has reached agreement with Transunion Petroleum Ltd ("Transunion") and Nautical Petroleum Ltd, a subsidiary of Cairn Energy PLC ("Cairn"), to join Cairn in the exploration of offshore Malta Area 3 - Blocks 1, 2 and 3 ("Area 3").
In December 2012 Cairn entered into a three-year Exploration Study Agreement ("ESA") with the Government of Malta for Area 3, which is located in the Sicily Channel covering an area of approximately 6,000 km2 and containing a number of prospective leads.
The ESA covers an initial two year period with geological studies, the reprocessing of existing 2D seismic data, the acquisition of new 2D seismic data and limited capital works. The agreement provides the right to negotiate a production sharing contract and it can be extended to a third year to acquire 3D seismic.
Under the terms of the agreement reached between MOG, Transunion and Cairn, MOG's wholly owned subsidiary Melita Exploration Company Ltd ("Melita") will assume a 40% working interest in the ESA. Melita will reimburse Cairn for 40% of the back costs incurred during the preparation of the ESA application and expenditure to date, which will be a payment of circa US$365,000 on completion. In parallel, Melita has paid Transunion a cash fee of US$50,000 in consideration for the assignment of their right to back in to the ESA and will pay consulting fees of US$150,000 in respect of their knowledge of the blocks, as well as future provisions for sharing in the successful exploration of Area 3.
This transaction is conditional upon the Government of Malta granting approval for Melita to become a party to the ESA.
Dr. Bill Higgs, Chief Executive of Mediterranean Oil and Gas, commented:
"We are very pleased to expand our footprint offshore Malta ahead of our exploration drilling in Area 4 later this year as MOG continues to geographically diversify exploration activities and capital spend. We look forward to working with Cairn to evaluate the exploration potential of Area 3, which we believe could mirror the exploration opportunities demonstrated elsewhere in the Sicily Channel."