Cadlao Oilfield Farmout Letter Of Intent

Sacgasco Limited (ASX: SGC) (“Sacgasco” or “the Company”) is pleased to announce a Letter of Intent from PNOC Exploration Corporation for drilling of the Cadlao 4 well and an Extended Well Test (EWT) as the first stage of redevelopment of the Cadlao Oil Field.

• PNOC Exploration Corporation Letter of Intent to Farmin to SC6B including Cadlao Oil Field
• Cadlao Oil Field Redevelopment targets 6.2 million barrels of economically recoverable oil
• Cadlao Drilling and Extended Well Test (“EWT”) planning for 2023 /24 drilling program
• Deep Venture drillship being prepared in Vietnam for Philippines Drilling Program

Sacgasco holds its SC 6B interest in its wholly owned subsidiary Nido and references to Sacgasco in this announcement includes this subsidiary, and vice versa.

PNOC EC is a wholly owned subsidiary of the Philippines National Oil Company.

Saba Drilling the Operator of the Deep Venture DP2 Drillship is diligently working to have the drillship readied for drilling a number of wells for Nido / Sacgasco and other Operators in the Philippines.

Nido’s Acreage in the Northwest Palawan Basin, Philippines

Letter of Intent Summary:

PNOC EC signed a Letter of Intent (LOI) to Nido to farmin to SC 6B and participate in the drilling of the Cadlao 4 well on the following terms:

• PNOC EC to acquire from Nido an undivided twenty percent (20%) participating interest in SC 6B for the drilling and EWT of the Cadlao 4 well.
  
• PNOC EC shall pay to Nido prior to and during drilling and EWT operations:
  • US$3.34mm to be paid upon execution of a binding farmin agreement to be finalized no later than 31 July 2023.
  • Up to an additional US$10.01mm to be paid upon cash calls as operations commence. The final amount is dependent upon actual approved costs by the regulator the Department of Energy (DOE).
• PNOC EC farmin agreement to SC 6B shall be subject to DOE, and the usual respective Board and Joint Venture approvals.

The relevant interest changes in the Cadlao SC 6B are:

Notes to above table:

Nido and PNOC will have preferential cost recovery rights for costs incurred before commencement of Commercial Production.

Sacgasco (Nido) previously announced an Investment Agreement for Blue Sky International Holdings to contribute equitably to the funding of the Nido’s initial drilling and Cadlao Redevelopment. (Refer ASX Release Dated 22 August 2022)

Sacgasco’s Managing Director, Gary Jeffery commented:

“Nido plan to drill the Cadlao EWT well as the first well in its 2 well Philippines drilling campaign as it can provide early cash flow, and moreover is assessed as the lowest risk well.

Placing the Cadlao EWT as a priority in our planned drilling program, to be followed by a Nandino exploration well, with an EWT upon success, will make for an exciting and potentially transformational 8-month period for Sacgasco and Nido in the Philippines.

“I’m delighted that we have secured this funding outcome which gives us further impetus for the potential redevelopment of the Cadlao oilfield. This is just one of a number of projects we are pursuing offshore the Philippines.

“We have had extensive discussions with suppliers and have identified suitable equipment for an extended well test which if positive and confirms our modelling, will likely lead to a more comprehensive development of Cadlao Oilfield and exploration of the nearby Cadlao East Prospect.

Other prospects in the area can also then be pursued and incorporated into the production operations for the Cadlao Oilfield

All the pieces, including the key team members are coming together rapidly. Shareholders will recall we have production alliances in place and an option with a potential offtaker for the oil. Sacgasco expects to fund the balance of the Cadlao Well Drilling and EWT costs from cashflow, external development financing, asset sales and / or shareholder funding.

The DP2 drillship Deep Venture is being prepared for drilling action in Vietnam. The drillship provides the most flexibility for Philippines operations in that it can dill in water depth ranging from 80 metres to 1,500 metres and can carry EWT and drilling equipment and supplies, hence simplifying logistics, as well as providing options for drilling in deeper water Service Contracts, like SC-14C which includes the potential redevelopment of the West Linapacan Oil field, and in which Nido has a Participating Interest.

The Philippines Government have shown they are supportive of our activities, and the local community and the DOE have shown their support for early drilling offshore Palawan.”

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