FORUM ENERGY CORPORATION (NASDAQ OTCBB: FRUEF, Frankfurt/Munich: FE8) (“Forum” or “The Company”
, through its wholly-owned, Bermuda-incorporated subsidiary, Forum Energy International Ltd. (“FEI”, has entered into a Memorandum of Understanding (“MOU” with Cadex Petroleum Limited (“CPL” a company incorporated in Alberta, Canada, with respect to the acquisition of CPL’s subsidiary in the Bahamas; Cadex Petroleum Bahamas Limited (“CPB”. CPB is the holder of both a 33.33% interest in the Cosmos Concession, and a 50% interest in the Yasmin Concession, both offshore in Tunisia. FEI will acquire from CPL 100% of the shares as well as all assets and liabilities of CPB.
Recoverable reserves have been estimated at 12 million barrels for Cosmos, and 8.22 million barrels for Yasmin. This would result in net recoverable reserves to FEI of approximately 8.11 million barrels.
CPB originally purchased four properties in Tunisia from Samedan of Tunisia, Inc., a subsidiary of Samedan Oil Corporation, of Houston, in late 1996, for a total consideration of US$1.4 million, the majority allocated to two onshore prospects. Only the two offshore oil fields, Cosmos and Yasmin, remain.
The Cosmos Concession was granted for a period of 50 years from January 1, 1986, and then reduced to 30 years by CPB opting for application of the 1985-1987 hydrocarbon laws, and is derived from the Cap Bon Golfe de Hammamet Exploration Permit (now relinquished). The Tunisian government (through ETAP) has the right to take up to a 20% interest in the Concession, with the option to be exercised within six months from filing the formal Plan of Development.
The Cosmos Concession is located 45 km offshore in water depths between 100m and 150m. A total of eight wells were drilled on the concession between 1980 and 1985 by BP Petroleum Corporation and Serept. The most significant of these wells are the Cosmos Sud-1, -2 and –4, all of which encountered producible oil and gas in Middle Mocene age sands (R-3 series) between mean subsea depths of 1473m and 1654m. These sandstones have similar physical characteristics to the highly productive regional Birsa Formation. Sand porosities range from approximately 25% to 33% and flow rates in these sands vary between 1723 barrels of oil per day to 2164 barrels of oil per day (bopd).
Structurally the oil accumulation is trapped by upthrown closures against northwest-southeast trending en echelon faulting. Oil-in-place (STOOIP) in proven fault blocks of the R-3 series is estimated to contain over 40 million barrels. Untested fault blocks could add an additional 170 million barrels (STOOIP). A Cosmos Sud-5 well has been considered to evaluate an untested fault block south of the Cosmos Sud-4 well. All of the 3-D seismic was reprocessed in 1995. The result was promising and this data is being re-evaluated for potential well locations. In other areas of the block additional potential remains in the Birsa sands, and carbonates of Eocene through Lower Cretaceous.
The Kinz Prospect was identified on the southern boundary between the Cosmos Concession and the Cap Bon Marin permit. It is situated in 112m of water and is approximately 50km from shore. Kinz is a large upthrown three-way south dipping trap along an extensive down-to-the-north fault system. This is the first trap out of a potential hydrocarbon generating basin with expected reservoirs from the Miocene Birsa to the Cretaceous (Aptian) Serdj formations. Target depths range from 2200m to 3000m.
In conjunction with the Cosmos discovery, the discovery of the Yasmin field makes it a likely candidate for combined development. An existing 3-D seismic survey should be re-interpreted to define the development potential. The significance of the Yasmin discovery is that oil was tested from three separate horizons. Interpretation of the Yasmin data could result in the need for additional drilling.
The Yasmin Concession was granted for a period of 30 years from July 13, 1991, and is derived from the Cap Bon Golfe d’Hammamet Exploration Permit. As with the Cosmos Concession, the Tunisian Government (through ETAP) has the right to take up to a 20% interest in the Concession, with the option to be exercised within six months of filing the formal Plan of Development.
The Yasmin Concession is located 45 km offshore in water depths between 100m and 200m. It was discovered by Buttes Oil and Gas in 1976 with the drilling of the Yasmin-1 well. Three subsequent wells were drilled between 1977 and 1982. The Yasmin-1, -2 and-4 wells were oil bearing and the –3 well was water bearing. Structurally the trap is a faulted four-way closure. Stratigraphically, hydrocarbons were encountered in Middle Miocene Birsa sands and Ain Grab carbonates and Upper Cretaceous Abiod carbonates between mean subsea depths of 1972m and 2411m. Sand porosities range from approximately 20% to 25% and carbonate porosities from 7% to 15%. Flow tests in the sands varied from 1450 bopd to 2250 bopd. The discovery of hydrocarbons in the Ain Grab carbonates offers another significant exploration objective on this block as well as over the entire Gulf of Hammamet.
“The acquisition of CPB will provide Forum with a unique opportunity to acquire estimated proved reserves, net to Forum, of over 8 million barrels at a very reasonable price, while at the same time giving Forum the opportunity to diversify the company geographically”, commented David R. Robinson, CEO of Forum. “Although in a different geographic location to our Philippine interests, we believe that adding proved reserves to the company will add significant shareholder value, and this in turn this will support the development of all our existing assets.”
FEI and CPL have agreed to commence negotiation of a formal Agreement covering the acquisition of CPB within 30 days of signing the MOU. The Parties have also agreed that they will not enter into negotiations with any third party with respect to CPB for 6 months from the date of the MOU. Prior to entering into the Agreement, FEI will complete technical and legal due diligence of CPB and the concession interests in Tunisia, with the intention of completing this due diligence within 60 days of the signing of the MOU.
On behalf of the Board of,
FORUM ENERGY CORPORATION
“David R. Robinson”
David R. Robinson
President and CEO