MEO Australia Limited's reported that its wholly owned subsidiary Drysdale Offshore Exploration Pty Ltd has executed a binding farm-out agreement (FOA) in relation to WA-454-P with Origin Energy Resources Limited, a wholly owned subsidiary of Origin Energy Limited. The FOA is subject to customary Australian regulatory approvals and the finalization of a Joint Operating Agreement. WA-454-P is located in the Joseph Bonaparte Gulf off Western Australia.
Origin Energy will acquire a 50 percent participating interest in the permit by reimbursing 80 percent of the costs expended by Drysdale in the permit to date and funding 80 percent of the cost of drilling an exploration well on the Breakwater prospect. Origin Energy will become Operator of the permit.
The untested cost of the exploration well is capped at $32.3 million (AUD 35 million). A mechanism has been agreed to adjust the cap for $/AUD exchange rate fluctuations from a 1:1 base. Costs exceeding this cap, including production testing (if required), will be funded by the parties according to their participating interests.
The reimbursement of back costs will be made in two equal tranches of $2.6 million (AUD 2.8 million). The first will be paid upon receipt of regulatory approval of the permit transfer and the second in July 2014.
Participating interests in WA-454-P following the farm-out will be:
MEO’s CEO and MD Jürgen Hendrich commented on the announcement:
“We are delighted to have attracted Origin Energy as our partner to unlock the tremendous opportunities we see in WA-454-P. MEO considers the Breakwater prospect has the potential to host significant gas and possibly liquids resources which, in the event of exploration success, would readily feed into a growing regional gas market. This project has evolved in a little over 2 years from acreage award in June 2011, acquisition of 3D seismic in early 2012, to the execution of a binding farm-in agreement in July 2013. It demonstrates MEO’s business model of securing prospective acreage, adding value by undertaking diligent technical work and attracting a substantial partner to recover invested capital and fund the majority of drilling costs, while retaining a material residual interest. MEO will seek to defray the residual 20 percent cost exposure to Breakwater-1 prior to drilling.”
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