Xtract Energy Plc reports the completion of a definitive agreement with Merty Energy, Petroleum Exploration, Education and Services Inc (Merty) of Turkey regarding an investment in a new exploration and production joint venture. Xtract and Merty, together, aim to create a new medium-sized oil and gas exploration and production business initially focused on Turkey, where Merty has particular expertise and experience.

Under the terms of the agreement, the parties have agreed to create a new Turkish company in which Xtract and Merty will initially have 20% and 80% interests respectively. Further to Xtract's initial investment of US$1.5 million made in July, Xtract has agreed to invest an additional US$3.5 million to fund the initial work programme of the new company and Merty will apply for the transfer of a portfolio of seven licence interests currently owned by Merty into the joint venture company. Xtract has the option to increase its shareholding in the new company to 34% by contributing a second tranche of US$3.5 million before 30 June 2009.

The seven licence interests to be transferred to the new company include 100% interests in offshore licences at Candarli Bay and in the Sea of Marmara and onshore licences at Edirne and Siraseki plus an 80% interest in an onshore licence at Alasehir/Sarakiz. The remaining 20% of the Alasehir/Sarakiz licence will continue to be owned by Turkish company, Petrako Petrol Gas and Industrial Co.

The first joint venture well in the Alasehir/Sarakiz licence area is on schedule for drilling in October 2008. The intention of the new company is that the lower risk onshore developments at Alasehir/Sarakiz and at Edirne will provide early oil and gas revenues that will largely enable the company to develop the offshore licences, including the very exciting prospect at Candarli Bay.

Tags: Xtract Energy