Groundstar Resources Limited has entered into a preliminary Farm-In and Standstill Agreement with an industry partner on its Petroleum Prospecting Licence (PPL) in the Takutu Basin in Guyana.
Under the terms of the Farm-In Agreement, the Farmee will pay 100% of all exploration expenses up to US$12 million to earn an undivided 55% Working Interest in the block. The Farmee has the option to increase its Working Interest by 10% to 65%, exercisable any time before July 22, 2008 by issuing to Groundstar, CDN$1 million worth of Farmee's securities. As a condition of the Farm-In Agreement, Groundstar has agreed to a Standstill clause whereby it will refrain from completing any transaction with any other party on the PPL until March 22, 2008 for a Break Fee of US$500,000.
Groundstar has three large seismically defined prospects on the PPL with a combined P90 Resources Estimate of 177 million barrels. The Karanambo #1 well drilled by Home Oil in 1982 tested 411 barrels of oil per day (42 deg API), with no water, during a 5 hour drill stem test proving the Basin has all the essential elements of a petroleum system. The fiscal terms of the PPL are very favorable.
Groundstar is extremely excited to enter into this Farm-In, as it will lead to the drilling of a minimum of two exploratory wells. It is anticipated the wells would be drilled in Q4 2008 to Q1 2009.