Under the Sale and Purchase Agreement, Hardman has sold the majority of its Perth Basin interests to ARC. The interests comprise the following:
The consideration for these interests is a cash payment of A$7,644,000 plus potential future payments up to a total of $1,500,000 if production from the Woodada Gasfield exceeds certain levels.
Hardman's remaining 12% equity in EP 413 (Jingemia) has also been made subject to a put and call option arrangement such that Hardman can require ARC to purchase the interest and ARC may require Hardman to sell the interest to ARC for an agreed amount. Under the terms of this agreement, ARC will acquire the interest no later June 2005.
The sale of the assets to ARC is conditional on required joint venture, third party and regulatory approvals, however, under the sale and purchase agreements, ARC has assumed effective control of the assets as of March 5th.
Commenting on the purchase, ARC's Managing Director Mr. Eric Streitberg said:
"This acquisition completes the current phase of ARC's carefully considered strategy of consolidating its strategic position in the Perth Basin. With this purchase, ARC now has interests in all of the producing fields in the North Perth Basin and operates the majority of them.
It has substantially diversified both our oil production base with the additional equity in Jingemia and our gas customer base with the purchase of the Woodada Gasfield. This purchase will also allow us to pursue our portfolio approach to exploration more effectively.
The acquisition will be funded from a combination of cash on hand and draw down of our $10 million working capital facility and is forecast to be cash flow and EPS positive subsequent to the development of the Jingemia oil field which is currently underway.
We are delighted to have been able to work with Hardman to complete this acquisition in such a short time frame. We will now get down to the business of adding value through the drill bit and enhancing the value of the existing production businesses after a great year which has seen us consolidate our position in the basin and deliver a series of record profits."
Commenting on the sale, Hardman's managing director Mr. Ted Ellyard said:
"Hardman is pleased to have achieved this rationalization of its Australian assets, which will enable the Company to focus its efforts on those areas where maximum value can be added. Since it acquired the original interests in the Perth Basin in mid-200, the Company has had a high success rate in discovering large oil and gas reserves in offshore Mauritania. The recent sale of an interest in Mauritania to British Gas shows clearly how the value of this area can rapidly appreciate. Hardman needs to be able to direct its technical and commercial resources to managing and further enhancing this asset.
In addition, the Timor Sea has recently come to the fore as an area which Hardman believes has the potential to host larger petroleum reserves than the Perth Basin, and is therefore considered more suited to Hardman's exploration style and capabilities. This Perth Basin sale will free up manpower and increase cash reserves to improve Hardman's ability to take advantage of opportunities in its Timor Sea acreage. The same applies to Hardman's large scale international exploration projects, some of which are nearing the drilling stage where important technical and commercial decisions need to be taken.
Both parties will benefit from this transaction, which has been largely possible because of the cooperative relationship which has existed between the two companies for some time. We consider ARC to be particularly well qualified to manage and exploit these assets, and we wish them well in their future Perth Basin exploration and production activities."
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