The agreement signed with joint venture (JV) partner Gujarat State Petroleum Corporation Limited (GSPC), will see Oilex drill, test, complete, commission and potentially commercialise well C-78 at the project.
Oilex will be solely liable for the costs associated with the well but will be entitled to sell all of the oil produced and receive 100% of the revenue generated.
Under the terms of the deal, GSPC will be allowed to back into the project by written notice to Oilex within 365 days of commercial production.
If it does decide to exercise its right, GSPC will pay Oilex 55% of any unrecovered expenditure plus a small mark up.
If GSPC doesn’t back in to the project during that period, well C-78 will be ring-fenced for “the exclusive benefit” of Oilex.
Drilling at the well is “essential” as Oilex prepares to obtain an extension to the Production Sharing Contract (PSC) term, which is scheduled to expire on 23 September 2019, the firm said.
Speaking about the agreement, Oilex managing director Jonathan Salomon said: “This reflects a significant milestone in the ability of Oilex to unlock the Cambay Field potential and assist in potentially securing an extension to the PSC term.”
“The agreement reinforces our determination to add value for shareholders by progressing the development of this key asset.”
Shares were up more than 8% to 0.45p.