In November 2012, TransAtlantic was awarded the first onshore production concession in recent Bulgarian history. It is a 35-year production concession covering the Koynare area, which contains the Deventci-R1 well, where Direct Petroleum Bulgaria discovered a reservoir in the Jurassic-aged Ozirovo formation at a depth of approximately 13,800 feet in 2008. TransAtlantic acquired Direct Petroleum Bulgaria in 2011 and the Deventci-R1 well produced 3.1 MMCF of natural gas on a limited test basis in 2012.
TransAtlantic has initiated the application process for a production concession covering the Stefenetz area, just south of the Koynare area. While the Bulgarian Parliament enacted legislation to ban hydraulic fracture stimulation in Bulgaria, they have clarified that conventional drilling and completion activities are not intended to be affected by the law. As a result, TransAtlantic expects its conventional natural gas exploration, development and production activity in Bulgaria to resume in 2013.
The licensing process for oil and natural gas concessions in Bulgaria occurs in two stages: exploration permit and production concession.
Under an exploration permit, the government grants exploration rights for a term of up to five years to conduct seismic and other exploratory activities, including drilling. The recipient of an exploration permit commits to a work program and posts a bank guarantee in the amount of the estimated cost for the program. The area covered by an onshore exploration permit may be as large as 5,000 square kilometers. The exploration permit may be extended for up to two additional two-year terms, subject to fulfillment of minimum work programs, and may be extended for an additional one-year term in order to appraise potential geologic discoveries. Annual rental fees are based on hectares under lease.
Upon the registration of a commercial discovery, an exploration permit holder may apply for a production concession. The production concession size corresponds to the area of the commercial discovery. The duration of a production concession is 35 years and may be extended by a further 15 years subject to the terms and conditions of the production concession agreement. No bonus is paid to the government by the company upon conversion to a production concession.