Under the farm-out agreement, Shell, a Palawan Basin veteran which has been operating in the area for more than 96 years, will acquire a 45% interest in SC54B, with Nido contributing 27% and Kairiki 18% of their respective participating interests.
To earn the interest, Shell will contribute 75% of the Gindara-1 exploration well cost up to a maximum of $US24 million, pay $US2.5 million towards past seismic costs and pay its pro-rata share of the 2010 and 2011 work program and budget from the date of signing.
Once the farm-out is complete, Nido will remain operator with a 33% interest while Kairiki will hold 22%.
Nido chief executive officer Jocot de Dios said the deal would allow the company to quickly drill Gindara and remain focused on maturing exploration drilling plans in SC58 and SC63.
Gindara is the highest-ranked drilling candidate in SC54B and lies on trend to Shell's giant Malampaya field, 30km to the north.
The prospect has an estimated oil in-place resource of 634 million barrels with an unrisked upside of about 1 billion barrels.
Kairiki Energy managing director Mark Fenton told PetroleumNews.net the farm-out to Shell was a vote of confidence for SC54B and represents the culmination of many years of hard work.
The JV has identified the Frontier Phoenix drill ship as a potential candidate for Gindara and is ordering long lead items to allow the prospect to be drilled during the March to May 2011 window.
Fenton said the JV hoped to lock in a rig contract in the coming months.
He also said that while the development options for the well depend on the type of discovery and JV approval, if an oil discovery was made it would most likely be a standalone development, while in the case of gas it could be tied into the Malampaya gas infrastructure.
The farm-out is subject to certain joint venture and Philippine Department of Energy approval.
Meanwhile, Kairiki Energy has embarked on a two-part capital raising involving a placement and rights issue to raise up to $8.51 million for its ongoing participation in the Philippines.
The placement will raise $3.36 million while the rights issue will raise around $5 million and will be underwritten by lead manager Patersons Securities.
Under the placement, Kairiki will place 84 million shares at a discounted price of 4c per share to institutional and sophisticated investors to raise $3.36 million.
The rights issue under which existing shareholders will be given the opportunity to subscribe for one new share for every five shares held will raise more than $5.159 million.
The funds will be applied for the company's interest in SC54A and SC54B as well as for additional working capital.
