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(Sharecast News) - Baron Oil updated the market on the TL-SO-19-16 production sharing contract (PSC) on Friday, located offshore Timor-Leste.
The AIM-traded firm said its wholly-owned subsidiary SundaGas, which operates the Chuditch PSC, has received a six-month extension for contract year two of the PSC from the Autoridade Nacional do Petróleo e Minerais (ANPM).
It said the extension granted SundaGas additional time to complete the necessary preparations before entering the drilling phase of the PSC.
As a result, contract year two of the PSC would now expire on 18 December this year.
Following that, on entering contract year three, SundaGas committed to drilling one well to appraise the Chuditch-1 discovery.
A decision on whether to proceed with the drilling phase was required to be made on or before the expiration date.
Baron Oil said the extension would allow SundaGas to conduct a comprehensive evaluation of candidate drilling locations and well trajectories, which would be crucial inputs into the final well design.
The company was aiming to ensure that all necessary preparations were in place to maximise the efficiency and success of the drilling operation.
To cover the extension period, arrangements were being made to extend the existing $1m bank guarantee, which was currently set to expire on 1 August.
An extension there would provide the required financial security throughout the extended contract year two.
"As the company indicated in its final results for 2022 on 23 May, there are a number of ongoing discussions with third parties regarding participation in the Chuditch appraisal well and future activities," the board said in its statement.
"Whilst there is the usual uncertainty over whether and when such discussions may come to fruition, the granting of a further six-month extension and its associated work programme maximises the chances of success.
"We look forward to updating shareholders on progress as and when appropriate."
At 1225 BST, shares in Baron Oil were down 4.05% at 0.09p.
Reporting by Josh White for Sharecast.com.
