Kairiki Energy Limited (ASX:KIK) Secures Farm-Out Agreement With Trafigura For SC 54A

Perth, Oct 22, 2009 AEST (ABN Newswire) - Kairiki Energy Limited (ASX:KIK)(PINK:KAIRF) has achieved a significant milestone in the development of the Tindalo project after its wholly-owned subsidiary Yilgarn Petroleum Philippines Pty Ltd entered into an agreement with Trafigura Ventures III BV (Trafigura) to farm-out 5% of its current 40% interest in the highly prospective Service Contract 54 Block A (SC 54A). Kairiki's Joint Venture partner, Nido Petroleum Philippines Pty Limited (Nido), has also advised Kairiki that it has reached a similar agreement with Trafigura to farm-out 10% of Nido's working interest in SC 54A on similar terms and conditions.

The farm-out agreement with Trafigura enables the Joint Venture to progress towards development of the Tindalo oil discovery followed by other targets within SC 54A, which contains significant additional contingent and prospective resources.

Consideration is a cash payment of US3.8 million (~A$4.2 million) after which Trafigura will be responsible for its participating interest share of the development costs of the Tindalo oil field project. Nido, the operator, is currently finalising arrangements for the rig and FSO and preparing for final investment decision approvals for the project.

Under the terms of a separate crude oil marketing agreement, Trafigura's affiliate Trafigura Pte Ltd will market Kairiki's net share of the crude oil produced from SC 54A.

Kairiki's Managing Director, Mr Lawrence Brown said, "I am extremely pleased to welcome Trafigura into the SC 54A Joint Venture, they are a world renowned oil marketing company who bring a wealth of oil industry experience which is complementary to the Joint Venture. Trafigura recognise SC 54A, which contains the Tindalo and Yakal oil discoveries, as a highly attractive opportunity and one which also has the potential to host significant additional oil resources."

Trafigura's Crude Trading Manager, Mr Richard King, said, "Trafigura was attracted to SC 54A as it presented an opportunity to participate in a rapid, low cost oil field development with the prospective for multiple follow-on projects in the near future, each of which has the potential for a high cash flow profile and rate of return. It also allows Trafigura to add significant value to the Joint Venture through its specialist expertise in "downstream" areas of the industry."

The farm out agreement is subject to final legal due diligence, Philippine government approvals and receipt of a release of the charge held by the Convertible Note Holder (IMC Group) over the 5% interest to be sold by Kairiki. Upon satisfaction of these conditions (and assuming that the corresponding Nido agreements are also concluded).

In the event that Philippine government approval is not forthcoming by 30 March 2011, Trafigura has the right to terminate and be repaid the consideration amount and any cash calls less any revenue they have received from SC 54A.

The Joint Venture is currently finalising the major contracts and funding plan, of which this farm-out is a key component, in order to proceed to the final investment decision for the Tindalo project in the short term.

Contact

Laurie Brown Managing Director Kairiki Energy Limited TEL: +61-8-9388-6711