OilVoice - Dominion Petroleum Announces Farm Out of Onshore Tanzanian Interests

Dominion Petroleum Announces Farm Out of Onshore Tanzanian Interests

Monday, February 15, 2010

Dominion Petroleum announces that agreement in principle has been signed with Les Etablissements Maurel & Prom ('M & P') to farm in to the Mandawa and Kisangire PSAs (Production Sharing Agreements) subject to execution of final agreements. Parts of the agreements are subject to certain conditions precedent, including approval by the Tanzanian Ministry of Energy and Minerals and the Tanzanian Petroleum Development Corporation.

Under the final agreements, M & P will acquire:
• a 40% interest in the Mandawa PSA onshore Tanzania , resulting in M & P owning 90% of the Mandawa licence and Dominion's interest being reduced to 10%; and
• a 35% carried interest in the Kisangire PSA onshore Tanzania (operated by Heritage Oil, who own a 55% interest), reducing Dominion's interest to 10%.

In return for these additional interests being acquired by M & P, Dominion's funding requirement in respect of the Kianika-1 well on the Mandawa licence will be reduced from 100% to 20% of the drilling costs and to 10% of associated expenses. Dominion will retain a 10% interest in all profits earned from the Mandawa licence.

In addition, M & P's interest in the Mandawa licence will rise to 100% upon the Government of Tanzania agreeing that exploration expenses incurred on other licences can be carried over to the Mandawa licence. At this point, all of Dominion's costs relating to the Kianika-1 well on the Mandawa licence will also be reimbursed.

In addition to approval by the Tanzanian Government, the agreement is also subject to certain other conditions, including the assumption by M & P of the operatorship of the Mandawa licence and confirmation by Heritage of the upcoming exploration program.

Andrew Cochran, Chief Executive of Dominion, commented:
'This agreement with Maurel & Prom constitutes active portfolio management and is part of the corporate repositioning recently undertaken. It significantly reduces Dominion's financial commitments for 2010 and allows us to focus more attention on our higher impact exploration assets in Uganda and Offshore Tanzania. We plan to increase activity in these two core areas during the course of this year.'