Novus will retain its existing working interests in the La Playa and West Bird producing fields and in the ultra-deep section which is subject to the BP farmin. There will also be a cash adjustment of $US3.45 million at closing of the transaction.

Following completion of the transaction, Novus will generally own and operate a 70% working interest in most of the leases. This includes prospects such as Homerun and Murdock Deep in the deep gas play, which has become a key focus of exploration interest for the industry in the Texas Gulf of Mexico area. Novus has initiated a farmout for a contribution to its drilling costs.

The company expects its total capital expenditure on the project will be below the previously budgeted amount, while it retains exposure to a material working interest in the acreage even after farmout.

Prospects in the deep gas play of Padre Island have meanwhile been analysed by Novus in detail. Typical mean pre-drilling unrisked reserves estimates are in excess of 100 bcf and several of those identified in the prospect inventory each have upsides in the 500 bcf to 1 tcf range.

A nominal 40% working interest in a single discovery of such a size would be worth much more than Novus’ current market value. The restructuring will lead to a reinvigorated deep joint venture in Padre Island. As operator, Novus plans to drill 6 deep prospects beginning later in 2003, in addition to any ultra-deep prospects that may be drilled as a result of the BP farmin announced in March.