Ratio Oil Exploration (1992) LP (TASE:RATI.L) today announced that it has signed a farm-out agreement with Italy's Edison International SpA (NYSE: EIX) for the Gal permit. The two companies intend to submit a joint applications with the Oil Supervisor for the two licenses that make up the Gal permit, which will supersede the previous applications for the licenses.
Under the agreement, Edison will be the well operator for the licenses, owning 20% of the licenses' rights. Edison was also given an option to acquire an additional 20% of the licenses. All of Ratio's costs, expenses, and commitments that it spent before the signing of the farm-out agreement will remain its sole responsibility. If all the conditions set out below are fulfilled and the agreement is closed, all the costs, expenses, and commitments from the date that the farm-out is signed will be shared by the parties proportionately to their rights in the licenses.
When the agreement is closed (subject to various permits), Edison will pay Ratio 20% of Ratio's prior expenses (even if they have not been paid in practice) with regard to activity at the Gal permit. Edison has also promised to pay 5% of the partnership's expenses for the first exploratory well at the licenses up to a maximum of $5 million.
Ratio CEO Yigal Landau said, "Edison's entry into the Israeli market is good news not only for Ratio, but for Israel's energy market as a whole, which desperately needs big oil companies. I, of course, welcome our cooperation at Gal, and I believe that this collaboration will also occur at other gas and oil assets in the Levant Basin. Ratio has until now benefited from the high skills of an outstanding operator, Noble Energy Inc. (NYSE: NBL), and it was important for us to maintain this outstanding professionalism to ensure exploration and production."
Commenting briefly on Gal's potential, Landau said, "I've said before, and I say it now, we believe that the Gal permit is a call option on the results of the deep Leviathan well, but it goes beyond that. We are very encouraged by the fact that Edison saw the potential of these areas. We will announce our complete estimates as required shortly before we begin drilling, but we are encouraged by the partial results in our possession. Last month, we announced that the Gal exploration permits and its primary prospect lie partly outside Israel's exclusive economic zone (EEZ)."
Sources inform ''Globes'' that this is the reason for year-long delay is granting two exploration licenses - Neta and Roy - for area of the Gal permit.
An exploration permit is a provisional right to map an area that may be suitable for drilling an oil and gas exploration well. When the mapping is completed, the permit holder applies for a license to drill in the area what includes prospects (geological structures) which may have oil and gas deposits. On February 16, 2010, Ratio obtained the full rights to the Gal permit, which covers 1,770 square kilometers in the southwest corner of Israel's EEZ. Ratio carried out a 3D seismic survey of the prospect, which indicated promising findings, which have never been published. The sources that the center of the seismic survey is a large structure (prospect), which may has substantial quantities of oil and gas.
Ratio today notified Israel Opportunity Energy Resources LP (TASE: ISOP.L), EZ Energy Ltd. (TASE:EZ), and and Modiin Energy LP (TASE:MDIN.L) that it was cancelling agreements to farm-out part of its rights in the Neta and Roy licenses in the Gal prospect, as it had not obtained permission for the agreements from the Oil Supervisor or the Antitrust Authority.
In notices to the TASE, Modiin Energy and Israel Opportunity said in response that they reject Ratio's notification and the reasons cited for it, and that they expected Ratio to honor the agreements with them. EZ Energy said that it was examining Ratio's notice.
Published by Globes [online], Israel business news - www.globes-online.com - on November 25, 2012
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