Knight Petroleum has entered into an option agreement with Polaris Resources Ltd. to acquire a 75% interest in the South Whale Basin Property, located offshore Newfoundland.
The South Whale Basin Property is comprised of three exploration licenses (1060, 1061 and 1062) covering 1,644,255 acres in the South Whale Basin, located approximately 350 kilometers south of St. John's, Newfoundland. The regional setting of the South Whale Basin is similar to that of the proven hydrocarbon bearing Jeanne d'Arc and Sable Basins. Numerous targets with the potential to trap hydrocarbons have been identified on the South Whale Basin Property. The Property is south of, and adjacent to, Husky Energy Inc.'s exploration licenses 1058 and 1059, which contains its 'Lewis Hill Prospect'.
An examination of the history of Newfoundland offshore exploration provides an understanding of the prospectivity of the Property. Early exploration drilling from 1971 to 1974 in the Jeanne d'Arc Basin had oil and gas shows, with some of the best shows associated with drilling on or near salt domes. A second round of drilling, in the 1980's, led to major commercial discoveries on non salt dome structures such as the Hibernia and Terra Nova Oil Fields. The South Whale Basin was the first area to be drilled in the Newfoundland offshore area. The relatively ice-free waters, combined with an abundance of salt domes that were familiar trapping mechanisms in the Gulf of Mexico, made it an attractive place to begin exploratory drilling. Fifteen wells were drilled in the South Whale Basin between 1966 and 1974, however, 11 of the 15 wells were drilled over the crests of, and adjacent to, salt domes, or on basement ridges with thin sedimentary cover. Although good reservoirs and several oil and gas shows were indicated, there were no commercial discoveries. Drilling over and adjacent to salt domes was not only ineffective, it also resulted in limited penetration of the prospective sedimentary package.
Polaris has shot 3,970 kilometers of seismic and interpreted several large structural and stratigraphic features in the Lower Cretaceous and Jurassic sediments, similar to geological structures productive at the Hibernia and Venture Fields offshore Newfoundland and Nova Scotia. It is the Company's intention to both shoot and purchase additional seismic to map these structures in detail and to identify specific drillable locations. The Company will then make a decision to drill the targets itself or to pursue a joint venture or sale to a major oil and gas company.
Polaris acquired the Property in 2001 by making a bid commitment of $5,600,000 of exploration work on the Property over five years and posting a $1,400,000 bond as security. If a well is not spudded by January 15, 2006, Polaris will forfeit all of its interest in the Property and any portion of the bond that has not been returned.