Porto Energy Enters into Farmout Agreement with Galp

Porto Energy Corp. has entered into a definitive farmout agreement on Aljuabarrota-3 concession with Petróleos de Portugal - Petrogal ("Galp Energia").

Galp will pay approximately US$7.8 million to earn 50% of Porto Enery's interest in the Aljuabarrota-3 concession, comprising approximately 300,000 acres, onshore Portugal.

Under the terms of the Agreement the Porto intends to drill a pre-salt well, the Alcobaça #1, in the Alubarrota-3 concession with total expected well costs of approximately US$7.0 million. The well has a target depth of approximately 3,000 meters, with drilling expected to commence in late August and take approximately 45-55 days to complete.

Galp will acquire a 50% participating interest in exchange for payment of 50% of Porto's sunk costs in the Aljubarrota-3 concession totaling approximately US$4.3 million and payment of their participating interest share (50%) of costs from and after the effective date of the Agreement.

Following the drilling and testing of the Alcobaça #1, Galp has the option to acquire a 25% working interest in each of the Porto's other concessions in exchange for payments totaling no more than 25% of Porto's sunk costs in each concession.

Porto Energy will remain the operator through the drilling of the Alcobaça #1 well, after which Galp will have the option to become the concession operator.