Eaglewood Energy has entered into a binding farm-out agreement in respect of PPL260 in the Papuan Basin Fold Belt, one of Eaglewood's four 100 percent owned exploration licenses in Papua New Guinea. The farm-out agreement is with Oil Search (PNG) Limited (OSPNG), a subsidiary of Oil Search Ltd., a company listed on the Australian Stock Exchange. OSPNG is the most active energy company in Papua New Guinea, and currently operates all the existing oil and gas production facilities in the country.

Under the terms of the farm-out agreement, OSPNG will pay Eaglewood US $1,500,000 and will complete the required seismic program at its sole cost by June 30, 2009 to earn a 10% interest in PPL260. OSPNG and Eaglewood plan to shoot further seismic in PPL260 at an estimated cost of US $1,600,000 of which Eaglewood's share is expected to be approximately US $800,000. After the completion of all the seismic work, OSPNG will have a three-month period in which to elect to earn an additional 60 percent interest in PPL260 in exchange for paying 90 percent of the cost of drilling an exploration well. PPL260 is on the same trend as the multi-TCF Hides and Juha gas fields which will be providing the majority of the gas for the $12 billion ExxonMobil led LNG project planned for first production in 2013.

The farm-out agreement is subject to certain conditions precedent, including receipt of Papua New Guinea Government approval to the farm-out and amendments to the work commitments under PPL260.

Eaglewood's CEO Brad Hurtubise said, "While our business plan is to farm out interest in our licenses to generate activity and reduce costs, we still intend to maintain a significant equity ownership in our licenses. This farm-out is the first of four we are trying to finalize with various parties this year. We are delighted to have completed this agreement with OSPNG and to have them as our partner, given that they are a high quality operator with significant in-country expertise."

Tags: Eaglewood Energy