Drillsearch has formed a strategic joint venture with QGC, a BG Group company, to explore and develop unconventional shale and tight gas resources in the Cooper Basin.
The joint venture involves QGC farming into, and acquiring, a 60% interest in DLS's strategically located ATP 940P covering over 2,000km2 (500,000 acres) of the Central Cooper Basin Nappamerri Trough Shale Gas Fairway.
The agreement places DLS in the unique position in the Cooper Basin of having access to QGC's gas commercialization capacity to support the full scale exploration, appraisal and development of shale and tight gas resources. The Basin is well situated to supply growing gas demand from LNG exports and domestic users in Australia. QGC is currently developing the QCLNG project in Gladstone.
Drillsearch Chairman Jim McKerlie said, "The JV with QGC is a great outcome for Drillsearch. It is a clear indication that Drillsearch is delivering on its three-prong strategy in the Cooper Basin – Oil exploration on the Western Flank, development of conventional Wet Gas along the Wet Gas Fairway and now delivering a focused exploration and appraisal plan to the Company's unconventional projects in the Cooper Basin."
"With the farmin by QGC and exercise of the options, Drillsearch's share of this unconventional exploration and appraisal program is fully funded. The company has now secured funding for all three prongs of its strategy. We are encouraged by the three oil exploration successes in the Western Flank of the Cooper Basin and progress of Western Cooper Wet Gas which is looking to start production later this year."
Drillsearch Managing Director Brad Lingo said, "This joint venture is significant for both the Cooper Basin and Drillsearch. This landmark transaction puts Cooper Basin shale gas resources on the world stage. This transaction is a major achievement for Drillsearch validating not only the quality of the position the Company holds in the Nappamerri Trough Shale Gas Fairway but also the Company's capability as an exploration operator in the Cooper Basin."
"The transaction with QGC (part of the BG Group, a global leader in gas commercialization), is the most significant milestone in Drillsearch's 24 year history. Importantly, it positions Drillsearch at the forefront of emerging Cooper Basin unconventional resource developments. This provides us with a platform for outstanding long-term growth opportunities and further growth in the Company’s already extensive conventional and unconventional gas projects in the Cooper Basin."
Key features of the transaction include:
The various agreements contain change of control provisions. The agreement under which QGC gains its interest in ATP 940P provides that, should a change of control occur (e.g., another entity gaining more than 50% of DLS shares), QGC can require (1) DLS to sell to QGC at an agreed price DLS' 40% in ATP 940P if that change of control occurs before the completion of the second stage of the exploration program at an agreed price, (2) DLS to sell to QGC at an agreed price a further 5% interest in ATP 940P if that change of control occurs after the completion of the second stage of the exploration program and (3) QGC may become the operator of ATP 940P. The Gas Marketing Heads of Agreement further provides that if DLS is subject to a change of control, QGC may terminate the gas marketing arrangements.
All of the Native Title and Environmental Approval process necessary for the award the ATP 940P to Drillsearch has been completed and the formal award of the permit is currently pending Queensland Government Ministerial approval. The commencement of the ATP 940 JV is subject to completion of this process and approval of the transfer of the interest in the permit once issued to QGC.
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