Drillsearch Signs Deals to Work with Santos in Australia
Long-term Gas Sale Agreement - Additionally, Drillsearch has entered into a firm Gas Sales Agreement (GSA) covering expected production from PEL 106A and PEL 513 through 2025. The GSA will be for the sale of raw gas with separate pricing for the condensate, LPG and sales gas components. Condensate and LPG pricing will be linked to international product pricing, less specific transport and processing charges. Under the GSA, initial gas sales by Drillsearch are targeted to be up to a maximum daily quantity of 70 million standard cubic feet per day raw gas.
Gas sales pricing is confidential, however, the agreed pricing provides for both fixed-price Consumer Price Index indexed gas pricing and oil-linked gas pricing. The gas pricing is structured to maximize the alignment between Drillsearch and Santos, both as a Joint Venture partner and as gas buyer. Importantly, Drillsearch expects to derive a significant value for the sale of the gas and associated liquids
Drillsearch believes Santos will be an effective Operator of these permits given Santos' long and successful record of Cooper Basin oil and gas development and commercialisation. Additionally, Drillsearch believes that the potential for gas from PEL 106A and PEL 513 will assist with underpinning gas sales both into the Eastern Australian domestic and export markets.
The Western Cooper Wet Gas Project discoveries in PEL 106A and the exploration commitments going forward on PEL 513 are not currently in production and will require a substantial capital investment to fund exploration and development within a reasonable timeline. Through this transaction with Santos, a substantial amount of risk relating to the ability to fund a full field development has been mitigated. Entering into the GSA will also enable Drillsearch to convert existing Contingent Resources into Reserves.
Oil Transactions
Drillsearch increases interest in Tintaburra Block Oil JV to 40 percent - Drillsearch currently owns an 11 percent interest in the producing Tintaburra Oil Field with Santos (Operator) holding the remaining 89 percent of the Joint Venture. As part of this series of transactions, Drillsearch will acquire from Santos a further 29 percent interest in the Tintaburra Joint Venture for $33.6 million (AUD 36.8 million) increasing its interest to 40 percent.
Drillsearch has been in discussions to acquire a more significant interest in the Tintaburra Joint Venture since 2009 and this transaction is the successful conclusion of those discussions. The Tintaburra Block currently contains gross 2P Reserves of 5.2 million barrels and gross 2C Contingent Resources of 10 million barrels (gross 3C 18.5 million barrels). The Tintaburra Block Joint Venture is in the process of committing to an expanded work program and enhanced oil recovery program to increase oil production and to improve overall oil recovery rates with a view to converting a significant portion of the Contingent Oil Resources to Reserves.
This acquisition will provide the Company with a more meaningful economic interest in the Tintaburra Block Joint Venture. The acquisition will also lift Drillsearch's 2P oil Reserves by 1.4 million barrels to 20.1 million barrels, an increase of 7.5 percent, and result in an immediate increase in oil production of approximately 150,000 barrels per annum.
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