Strata-X farms out the Serowe CSG project in Botswana

Strata-X Energy has executed a Heads of Agreement with Botsgas, a private Australia based company with strong ties to the Republic of Botswana, to accelerate the appraisal and development of the Company’s Serowe CSG Project.

The executed Heads of Agreement allows for the drilling of one firm vertical well with staged options for an additional 18 vertical wells,which includes 6 additional appraisal wells and up to 3 production pilots designed to prove commercial gas flows and add material reserves.

The Company will retain operational control of the project for the foreseeable future and expects to commence field operations early in the second quarter of 2020.

The main focus of the farm-out will be Strata-X’s high-grade area of the Botswana CBM Fairway. This area is interpreted to contain, on average, 10 metres net Serowe bright-coal seams over a 50metre interval with high gas saturations up to 100%. A third party has certified 2.38 TCF prospective gas resource within Strata-X’s tenements in the high-grade area. This interpretation is re-enforced with the results of the Company’s 19B-1 well drilled in 2019 by Strata-X and a nearby historic core hole data, which bubbled free gas from the target bright-coals.

The 19B-1 well intersected 18 metres of net coal with 12 metres of multi seam bright coals having up to 100% gas saturations. After the drilling of 19B-1, anarea immediately surrounding the well was certified to contain 2C Contingent Resources of 23 Bcf of natural gas.

Staged Farm-out Program

The first farm-out well under the Heads of Agreement is located about 4 km from 19-B-1. The well, called Botgas-19-B-2, will be drilled and cased to the top Serowe bright coals, then drilled 60 metres through the Serowe coals and under reamed over the Serowe coals open interval. Temporary flow test equipment will be used to carry out a short term continuous and controlled draw down test designed to determine water flows from the coals and induce gas breakout. Botsgas is required to fund the first well as a minimum program to an approved budget of up to US$300,000. If the cost of the initial well exceeds US$300,000, then Strata-X will be required to fund the costs in excess of that amount.

Stage 1B is to drill and flow test an additional 6 appraisal wells (~4km to ~30 km from other wells) within Strata-X’s high-grade area with the target to prove material 2C/3C resources to justify the first Stage 2 production pilot. Stage 2 is the first production pilot designed to prove gas flow rates. The pilot will include an additional 4 wells located around one of the 7 appraisal wells drilled in Stage 1 with about 400 metre spacing between each well. All 5 wells in the pilot will be equipped with downhole and surface equipment plus water handling facilities to allow for a long term (3 to 6 months) controlled continuous drawdown flow test to be carried out to determine gas flow rates.

Stages 3 and 4 are two addition production pilots, each comprising 5 wells.Botsgas has the option to use one or more of the production pilot wells as appraisal wells if required to add reserves.


The initial Stage 1A requires payment by BotsGas of the budgeted costs within 45 business days from the date of the Heads of Agreement and for Strata-X to then commence the drilling program within 60 days of receipt of funds. If the program is not commenced within that 60-day period, Strata-X must refund to BotsGas the funds received.

At the end of Stage 1A, BotsGas then has a 30-day period in which to elect to proceed with the farm-out for the undertaking of Stages 1B, 2, 3 and 4 or to withdraw from the arrangements. The progression of the farm-out will also be subject to several conditions precedent including satisfactory due diligence by BotsGas and Board approvals ofthe terms of the farm-out agreement. These conditions must be satisfied by 15 June 2020. The parties must also executea formal farm-out agreement based on the terms contained in the Heads of Agreement by 30 June 2020 otherwise any dispute over the terms of the farm-out agreement will be referred to expert determination.

If the farm-out proceeds, BotsGas will have the option at the end of each stage to elect to proceedto the next stage or to end the farm-out arrangement. Once BotsGas elects to proceed with a stage then Strata-X and BotsGas must complete the stage within a 12 month period.

Each stage must be fully funded by BotsGas up to a capped cost which has been agreed between the parties on the basis of the estimated budget for each stage. Strata-X will only need to provide funding if there are cost overruns, which contribution will be made on the basis of 51% from Strata-X and 49% from BotsGas.

Earned Interest

BotsGas will not earn any interest in any of the Strata-X tenements until it completes Stage 1B (drill and flow test 7 appraisal wells) and elects to proceed with Stage 2. If Botsgas elects not to proceed with Stage 2 or otherwise fails to fund Stage 2 as required under the farm-out then Botsgas will not earn any interest in any tenements. If BotsGas does complete Stage 1B and elects to proceed to Stage 2, then it will earn a 25% interest in all of Strata-X’s Botswana tenements (subject to on-going requirements).

If BotsGas funds and completes Stage 2 and elects to proceed to Stage 3, it will increase its interest to 49% in the tenement which is the subject of that first pilot program.

If BotsGas funds and completes Stage 3 and elects to proceed to Stage 4, BotsGas will increase its interest to 49% in the tenement which is the subject of that second pilot program.

If Botsgas completes all stages of the farm-out then Botsgas will increase its interest in all of the Strata-X tenements located in Botswana (not just those which are the subjectsof the pilot programs) to 49%, with Strata-X retaining a 51% interest in those tenements.

If BotsGasdoes not proceed to or fund Stage 3 or Stage 4, it can elect to retain a 49% interest in the tenement which coversthe Stage 2 completed pilot program but BotsGas will otherwise relinquish the 25% interest that it has previously earned in Strata-X’s otherBotswana tenements.

During all stages of the farm-out arrangements, Strata-X will be the Operator of the Project and retain no less than a 51% interest in the Serowe CSG Project, and retain that position upon commencement of any joint venture which follows the completion of Stage 4 (subject to meeting its share of on-going funding under the terms of the joint venture).

Strata-X will announce the timing of the first farm-out well once funds and contractors are secured.

The Company holds 4,784 KM2 (1,129,000 acres) over the Serowe CBMProject with a certified Prospective Resource of 6.05TCF.


Source: Strata X Energy



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