Pursuant to the Operation Agreement signed on 5 June 2012, Chañares agreed to release EP Energy from its Commitment under the JV Agreement that was signed on 12 January 2011. EPI is focused on workover and infrastructure investments to improve production on the existing oil wells during the years 2012 and 2013. EPI has invested in its own centralized well fluid collection tank and collection pipeline, which have been put to use since the second quarter of 2013 to contain and transport petroleum to customers. EPI would also invest in its own water injection capacity in the second quarter of 2013 to lower field operating costs.
The Directors have considered the current economic situation of Argentina and have decided to restart the overall business development plan on the Chañares Oil Project in the future years. The future business plan is developed by applying a more prudent estimation of those factors and assumptions for future cash flow estimation on the Project. From the Technical Review Report issued by Roma Oil and Mining Associates Limited dated 19 March 2013, the Best Estimate (2C) Contingent Oil Resources as at December 2012 remained the same as that of December 2011. In developing the future business plan, the Directors have taken a more prudent approach and have only considered the production estimation up to the expiry of the Concessions in the year 2027, which is after the 10-year extension period. The Oil Resources of the Project have not been reduced, the change in this future development plan and the production estimation is a more prudent way to value the Project. The production quantity used to calculate the future cash flow from operations has substantially decreased.
After setting up the technical and operational teams and with the stable development in our Argentina operation, EPI continues to make an effort in searching for the right business opportunities for its oil and gas exploration and production business. EPI is focused on business opportunities in the oil and gas sector that fits its criteria of stable production base, proven reserve, good development opportunities in industrial-advanced countries such as the United States of America. EPI is currently evaluating a few acquisition opportunities in North America and one of them has already been negotiated to an advanced stage. Given the dollar amount of the proposed acquisition proceeds, the transaction may constitute a major or very substantial acquisition transaction for the Company under chapter 14 of the rules governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and further announcement(s) will be made by the Company in accordance with the Listing Rules. The Board wishes to emphasize that the negotiations for the proposed acquisition may or may not proceed. Shareholders and investors of the Company are urged to exercise caution when dealing in the shares of the Company.