Gulfsands Petroleum agrees farm-out from Colombian block

Gulfsands Petroleum has agreed a farm-out agreement for one of its two Colombian projects with Canada's Samarium Tennessine.

Samarium will take a 70% interest in the Putumayo-14 Exploration and Production of Hydrocarbons project (PUT-14) contract and fund all the exploration and other related costs up to $16.1m with an option to take a full 100% participating interest.

In order to acquire the remaining 30%, subject to approval by Colombia's regulator, Samarium will need to replace the $1.7m letter of credit in place to guarantee performance under the PUT-14 contract.

On the valid exercise of the option, Samarium shall hold a 100% operating interest in the contract.

The pair have also agreed a joint operating agreement and, prior to the exercise of the option, Gulfsands will remain the license operator and Samarium will become technical operator, with the intention of both sides that the Canadians will ultimately assume full operatorship covering both responsibilities.

The first exploration phase of Block 14, which lies on Colombia’s border with Ecuador, is due to expire in November 2017 with a minimum work obligation of 93 km of 2D seismic data to be captured in a new survey and the drilling of one exploration well.

Shares in the company popped 16% to 3.34p by 1230 BST on Wednesday.