“The acquisition of an interest in the La Punta oil field provides us with existing production, near-term development and exploration upside to complement the exploration potential of our West African acreage,” managing director Mark Fenton said yesterday.

“This is our first major step to rebalance our exploration and production portfolio.”

The La Punta acquisition will be achieved through an assignment agreement with Union Temporal Omega, a joint venture that includes TC Oil & Services, the technical operator of the La Punta Oilfield.

This agreement gives Baraka an immediate net 8.28% share after government royalties of production from the La Punta-1 well, currently producing 1400 barrels per day of 37 degree API oil from the Mirador Formation.

The initial capital outlay for La Punta-1 will be funded out of cash reserves and total costs will be staggered through the next six months, Baraka said.

The company will also be entitled to a 25.75% share of the recently begun liquids stripping gas business for the next five years, increasing to a 50% share from September 2012.

In addition, an application has been lodged for the drilling of an up-dip development well, La Punta- 2, which is expected to be drilled at the end of this year.

Baraka will acquire 8.28% of future production from the Mirador Formation in La Punta-2 which Baraka estimates could potentially exceed 5000bpd.

Deeper exploration objectives are also targeted at La Punta-2 and, given a discovery, Baraka will obtain a net 25.76% of future production from these formations.

The location of La Punta-2 will be based on the results of a 45-square kilometre 3D seismic survey which will be acquired from October 2007.

Baraka will also have the rights to participate in future production from any exploration wells to be drilled in the La Punta Block. The timing of exploration drilling will be considered by the joint venture after acquisition of the 3D seismic survey.

The initial payment for La Punta-1 is $US1.5 million with a further $US1.3 million due this month for La Punta 3D seismic, and an additional $US2 million cash consideration.

The residual payment of US $5.7 million includes the drilling and completion of the La Punta-2 development well and upgrading the La Punta oil facilities.

The La Punta transaction will be funded initially from current cash reserves and cash flow from La Punta.

“The present transaction allows the company time to best structure funding options with minimal impact on current cash reserves,” Baraka said.

This deal could be the beginning of the company’s involvement in South America, according to Fenton.

“We are excited by the opportunities opening up for us in South America, and we believe that there are other oilfields like La Punta where we can acquire producing assets with development and exploration potential in the future,” he said.

Baraka has an extensive frontier acreage spread in West Africa, but it now wants to acquire production, development and near-field exploration assets.

“South America, and in particular Colombia, is an appropriate region of focus due to the large number of smaller onshore oil and gas fields, and high business activity level of the industry,” Fenton said.

“Through our expanding network of contacts Baraka is working to acquire more opportunities of this type throughout the South American region.”