TORONTO, Oct. 12, 2011 /PRNewswire/ - PetroMagdalena Energy Corp. (TSXV: PMD) announced today that the Company has finalized the contract to farm out 30% of the Santa Cruz Block to a private Colombian investment fund as previously announced on August 25, 2011. The investment fund will earn a 30% participation in the block for a carry of 60% of the first exploratory well and 45% of the second exploratory well to be drilled. PetroMagdalena will retain a 70% working interest and remain as operator. The Santa Cruz Block is located in the Catatumbo Basin in Colombia and neighbors the producing Rio Zulia field, which has a cumulative oil production of approximately 180 million barrels.
Luciano Biondi, the Company's Chief Executive Officer stated: "We are very pleased to announce the completion of this farm out agreement as it frees up approximately US$7 million of funding in this year's budget, which will be put towards the expanded work program at Cubiro. We look forward to sharing updates on the development work at our producing Petirrojo field in the Cubiro Block later this quarter, as well as the exploration drilling at Yopo."
All permits have been obtained at Santa Cruz and the location for the first exploratory well is currently under construction. PetroMagdalena has also contracted a 1500 HP drilling rig and plans to commence drilling in mid-November of this year. The cost of drilling the well is estimated to be approximately US$12 million, of which the Company's share will be approximately US$5 million. The completion of this farm out agreement minimizes the Company's capital expenditure commitment for the Santa Cruz Block, while maintaining the benefits from a potentially significant new discovery.
PetroMagdalena is a Canadian-based oil and gas exploration and production company, with working interests in 19 properties in five basins in Colombia. Further information can be obtained by visiting our website at www.petromagdalena.com .All monetary amounts in U.S. dollars unless otherwise stated. This news release contains certain "forward-looking statements" and "forward-looking information" under applicable Canadian securities laws concerning the business, operations and financial performance and condition of PetroMagdalena. Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to estimated production and reserve life of the various oil and gas projects of PetroMagdalena; the estimation of oil and gas reserves; the realization of oil and gas reserve estimates; the timing and amount of estimated future production; costs of production; success of exploration activities; and currency exchange rate fluctuations. Except for statements of historical fact relating to the company, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of PetroMagdalena and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions, risks relating to international operations, fluctuating oil and gas prices and currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the oil and gas industry, failure of plant, equipment or processes to operate as anticipated. Although PetroMagdalena has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. PetroMagdalena undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release. SOURCE PetroMagdalena Energy Corp.