Forum Energy allots $3 million for offshore Palawan oil search project

MANILA, Philippines - Forum Energy Ltd. will spend an initial $3 million for the first phase of oil exploration in its newly-converted Service Contract 72 at the Reed Bank basin west of Palawan, its top executive said.

Forum Energy president Walter Brown said the key provisions of the SC 72 contract will cover an area of 8,800 square kilometers, which is 85 percent of the original geophysical survey and exploration contract (GSEC) 101 block.

Based on the work program, the initial exploration period will be for seven years, subdivided into four phases.

Under the first sub-phase, the company is committed to perform within an 18-month period either of the following: drilling of one exploratory well, or acquisition of at least 250 sq km of 3D seismic data or its equivalent high-resolution 2D seismic data.

Further drilling and/or seismic work during the second sub-phase, Brown said, will last for another 24 months. In case of a discovery, Brown said the company, may enter the production period of the service sontract, which will have a 25-year duration.

“It is the company’s intention, subject to funding, to commit expenditures significantly in excess of the minimum work program requirements,” he said.

Forum Energy has a 70-percent interest in SC 72.

In 2006, results from a 248-sq. km. 3D seismic survey over the license area indicated about 3.4 trillion cubic feet (TCF) gas-in-place (GIP) with significant upside potential.

In 2008, Philex Mining Corp., the country’s biggest mining company acquired an effective 61.44-percent controlling stake (held directly and indirectly) in Forum Energy through a tender offer for all shares at 48 percent per share.

An additional fundraising in November 2009 of £1.5 million (approximately $2.4 million) has increased Philex Mining’s stake (held directly and indirectly) to 62.59 percent. Early this week, the Philex Group acquired an additional 2.4-percent stake to raise its holdings to 65 percent.

“Forum Energy has made significant progress with the recent award of SC 72. Having worked for over three years on the conversion of GSEC101 to a service contract, this award paves the way to the delivery of material value to Forum Energy’s shareholders with the exploitation of a potentially worldclass gas deposit. Forum will announce its future plans regarding further appraisal of SC72 shortly. It is the company’s intention to commence further appraisal work, without delay,” Brown said.

In 2009, Forum Energy recorded a gross profit of $0.2 million from a loss of $0.3 million the previous year due to the commencement of production revenues from Galoc and the increase in oil prices during the past year.