Australia's junior explorer Tangiers Petroleum Limited (the Company) disclosed Tuesday that the company had issued an announcement Oct. 8 advising shareholders that it had terminated the Farm-Out Agreement with CWH Resources Limited in relation to the offshore permits WA-442-P and NT/P81 located in the Joseph Bonaparte Gulf, northern Australia (Permits).
This letter is to provide background on the farm-out process and provide a history of the Permits and their current status.
The Company commenced a search for a farm-in partner in April 2012 and commissioned a well-regarded and experienced petroleum consultancy to manage the process. 176 companies (both Australian and international) were identified, contacted and followed up in the process. Although a number of companies initially showed some interest and proposed minor contributions, many were deterred by the magnitude of the work commitment of over $56.78 million (AUD 60 million) in today’s costs, and the fact that the work completed to date had not yet confirmed drilling opportunities. CWH Resources was the only company prepared to make a significant contribution of $32.94 million (AUD 35 million) to the outstanding mandatory work commitment.
History of the Permits
The Titleholders (the Company - 90 percent, and Ansbachall Pty Ltd. -10 percent) applied for the Permits in December 2009 and they were granted in early 2010 for a period of six years. The first three years of the work program commitment (to April/May 2013) is mandatory and comprises of:
The work completed to date has been the reprocessing of previously acquired seismic data and technical evaluation.
The Year Two and Year Three commitments are relatively significant, especially for a junior company to take on at 90 percent equity. The failure to complete the Year Two program by April/May 2012 placed the permits in jeopardy and there had already been applications to government for extensions of time prior to the Board changes in September 2012.
The current Board and staff of the Company have made every effort to deal with the legacy of this significant work program commitment, but understandably the government is running out of patience and clearly the Company itself cannot fund the program at 90 percent.
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