The deal will also include all related geological, seismic and technical data from the four licences, PPL 257-260, which cover a total area of 6.8 million acres.
The shares will be subject to a voluntary escrow agreement with one third of the shares released every six months from the close of the transaction.
Upon completion of the transaction and Surge's private placement of 10 million shares price at C85c concurrent with the closing of the deal, Transeuro will own about 53% of Surge.
Transeuro will also be given the pre-emptive right to buy up to 50% of the shares that Surge is issuing and will appoint company chief executive Hal Hammerich to Surge's board of directors. In addition, Surge's management will nominate another Transeuro nominee for election as a director at its next shareholders' meeting.
The PNG Government has the option to acquire a 22.5% stake in any or all of the four licences while Transeuro will be granted a right to back-in for a 10% stake in the licences after Surge has drilled and tested three exploration wells by paying Surge an amount equal to 10% of the exploration and development costs incurred up to that date.
The transaction is expected to close on or about July 31, 2007.
Surge plans to carry out under the first exploration phase to conduct a $US2 million offshore bathymetric study and a subsequent offshore seismic program costing about $3 million in PPL 257 that is scheduled for completion late this year.
It will carry out onshore gravity/magnetic survey over both PPL 258 and PPL 260.
The company will then drill one exploration well in PPL 259 at an estimated cost of $15 million in the first quarter of 2008 to fulfil the second exploration phase.
The predominantly offshore PPL 257 covers about 1.7 million acres in the Cape Vogel Basin and includes several significant leads and prospects that have been identified by past operators from previous seismic but never drilled.
PPL 258 covers 2.2 million acres in the onshore North Niugini Basin in West Sepik Province, an area well known for oil and gas seeps.
PPL 259 and PPL 260 lie in the Papuan Fold Belt. PPL 259 covers 1.36 million acres and surrounds the undeveloped Stanley, Elevala and Ketu gas condensate fields, while PPL 260 covers more than 1.5 million acres.
