Oilex inks agreement with Gujarat State Petroleum over planned Well C-78

Shares in Oilex Ltd have are up more than 13% after it executed an agreement with Gujarat State Petroleum Corporation Ltd on the next planned vertical well in the Cambay Field (Well C-78).

Oilex, which is GSPC's JV partner, said the agreement was a key milestone towards the proposed drilling of Well C-78, unlocking value and possibly securing an extension to the Cambay Field Production Sharing Contract (PSC) term.

"In addition to testing the shallower OS-II zone, the well is designed to obtain core samples for the EP-IV zone reservoir which are needed for future drilling, completions and stimulation optimisation," said Oilex in a statement.

"The company has an independently verified multi-TCF resource in the EP-III/IV reservoirs at Cambay," it added.

Under the agreement, Oilex would drill, test, complete, commission and, subject to successful operations, commence commercial production from the proposed Well C-78.

It would be solely liable for all expenditure associated with Well C-78, and, subject to GSPC exercising its back in right, Oilex would be entitled to sell 100% of production and receive 100% of revenue from Well C-78.

GSPC shall be entitled to back-in to Well C-78 within 365 days from the commencement of commercial production from Well C-78 by written notice to Oilex.

If GSPC elects to exercise its back-in right, it would pay to the Company 55% of any unrecovered expenditure, plus a small mark-up.

If GSPC did not exercise its back-in right within the 365 day period, Well C-78 would continue to be ring fenced for the exclusive benefit of Oilex for the balance of the PSC term and any extension thereto.

"Oilex has also agreed to impose limits on recoverable expenditure for operating costs should the well commence commercial production. The limits are consistent with the Company's expected operating costs for Well C-78," it said in the statement.

At 10:34 BST, shares in Oilex were up 13.58% to 0.46p.