VMM 37 Block

The VMM-37 block (43,158 gross acres) provides Sintana with a significant strategic position in the Middle Magdalena play with exposure to both conventional (100% private participation interest) and unconventional (30% private participation interest) resource potential. The Middle Magdalena is the oldest producing basin in Colombia, dating back to the 1918 discovery of the giant La Cira-Infantas field complex (900 million barrels). Historically, only the Tertiary section (conventional reservoirs) has been systematically explored. Approximately two billion barrels of oil have been produced in the basin over the last century.

The Company announced a significant Farm-out Agreement with ExxonMobil (estimated up to US $130M) on November 12, 2012 to explore the Unconventional potential of the VMM-37 property located in the Middle Magdalena Basin. Sintana will focus on the substantial conventional resource potential in the Tertiary plays in the VMM-37 block while ExxonMobil explores the significant unconventional resource under the farm-out agreement.

VMM-37 Farm-out with ExxonMobil

Major elements of the VMM-37 Agreement are as follows;

  • ExxonMobil will acquire an undivided 70% participation interest and operatorship in the formations defined as unconventional by completing the Work Program.
  • Sintana will retain the remaining 30% interest in the unconventional play as well as its current 100% participation interest in the conventional resources overlying the top of the unconventional interval.

VMM-37 Work Program

  • ExxonMobil will pay 100% of all Exploration Phase I well costs (2 wells + 1 horizontal leg). The estimated timing for the commencement of drilling operations on the first exploration well is the fourth quarter of 2014. Additional consideration was paid to compensate Sintana for its past expenses connected with the block.
  • ExxonMobil will have an option to proceed to the next phase. In this development phase, it will pay 100% of all additional costs to a maximum of US $45 million, of which US $10 million will be recouped by ExxonMobil from 50% of Sintana's production proceeds.
  • As agreed by Sintana and ExxonMobil, as joint participants in the Block, good faith efforts will be made to locate exploration wells targeting the unconventional play in such a way as to also test conventional prospects.
  • At various stages of the Work Program, as defined in the Agreement, ExxonMobil will have the right to withdraw from the project, relinquish operatorship and reassign to Sintana the right to the 70% participation interest it would have retained had it met all investments and activities requirements of the Agreement.

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VMM-37 Resource Report
July 31, 2012