 Under the farm-in agreement and subject to obtaining regulatory approvals from Agencia Nacional do Petróleo (the Brazilian  Petroleum Agency), Karoon Petróleo & Gas SA. will earn a 20% equity interest by funding a proportion of the costs  of drilling two exploration wells. Karoon Petróleo & Gas SA will then pay its equity share of continued work and reimburse Petrobras for sunk costs.  The two well drilling program included drilling of the Quasi Prospect in Block S-M-1354, which was subsequently plugged and  abandoned during September 2010. The second well, the Maruja-1 exploration well, in Block S-M 1352 commenced drilling  during September 2010 and was suspended following a completion of a production test during January 2011. Block S-M 1354  expired during November 2010 and was formally relinquished by Petrobras during January 2011. The farm-in area of S-M 1352  has been reduced to an area retained around the Maruja discovery. This reduction also includes the partial relinquishment of  S-M 1352.  Continued work during the financial year also included the drilling of a third well, the Maruja-2 appraisal well, which was  completed and abandoned during March 2011.  Under the farm-in agreement with Petrobras, the Group’s share of the costs incurred on both Blocks as at 30 June 2011 was  $39,429,646, which is payable upon obtaining regulatory approvals. In accordance with normal industry practice, the Group has entered into joint venture operations with other parties for the  purpose of exploring and evaluating its permit interests. If a participant to a joint venture operation defaults and does not  contribute its share of joint venture operation obligations, then the remaining joint venture participants are jointly and severally  liable to meet the obligations of the defaulting participant. In this event, the interest in the exploration permit held by the  defaulting participant may be redistributed to the remaining joint venture participants. In the event of a default, a contingent liability exists in respect of expenditure commitments due to be met by the Group in respect of the defaulting joint venture participant.  No material losses are anticipated in respect of any of the above contingent liabilities.  The Group had no contingent assets as at 30 June 2011 (30 June 2010: $Nil). (b) Contingent Assets (vi) Joint venture operations (iii) Bank guarantees were provided in respect of operating lease rental agreements  for the Group. These guarantees may give rise to liabilities in the Group if  obligations are not met under these guarantees. The bank guarantees given to  lessors are fully funded by way of payment of security deposit (refer Note 13). (iv) In the previous financial year, a performance guarantee (via a letter of credit)  was provided to a third party supplier by the Group for exploration work  undertaken in Peru. The letter of credit was fully funded by way of payment of  a security deposit (refer Note 13), and was released once the Group’s obligation  under the contract was satisfied. (v) On 23 August 2010, Karoon Petróleo & Gas SA, a wholly owned subsidiary of the  Company, executed a farm-in agreement with Petróleo Brasileiro SA (‘Petrobras’)  to acquire a 20% interest in both Block S-M-1352 and Block S-M-1354 located  in the offshore Santos Basin, Brazil.  Consolidated 2011 2010 $ $ 537,091  70,307 - 293,324 39,429,646  - Karoon Gas Australia Ltd  Annual Report 2011 69