Chariot Signs Farm-out Agreement with Capricorn

Chariot Oil & Gas Limited signed a farm-out agreement with Capricorn Mauritania Ltd., a wholly owned subsidiary of Cairn Energy PLC, for a stake in Chariot's C19 License. Under the agreement, Cairn gains a 35% equity interest in Chariot's license in return for paying approximately $26 million for the costs of the 3D seismic data acquired by Chariot on the block, as well as other back costs.

Chariot will have a 55% stake and operatorship of the license, with Société Mauritanienne des Hydrocarbures (SMH) holding the remaining 10%  as a carried interest. If, before the end of the first phase of the license (June 15, 2015), Cairn were to increase its interest to greater than 50%, Chariot would support its application for operatorship of the block. This agreement remains subject to the approval of the Ministry of Hydrocarbons in Mauritania and includes standard representations and warranties given by both parties.

A farm-out agreement is one by which a party who owns drilling rights assigns all or a portion of those rights to another in return for drilling and testing on the property. The party assigning the right is referred to as the 'farmor' while the party to whom the rights are assigned is referred to as the 'farmee'. Here, the farmee only seeks an interest in the farmor's license after paying the agreed consideration.