Australia's junior exploration and production company Central Petroleum Limited (Company or Central) announced Thursday that the firm and farmout partner Total have agreed to increase expenditure for the Stage 1 exploration program of their Joint Venture (JV) in the South Georgina Basin, Queensland, Australia by $35 million.
Stage 1 covers initial exploration activities on the three Queensland permits ATP909, 911 and 912, and the one Northern Territory (NT) application area EP(A)132. As Stage 1 started in the second half of 2013, to date 605 miles (974 kilometers) of seismic has been recorded on the Queensland permits, with a number of core wells planned to be drilled from April 2014. Exploration will not get underway in the NT until the title has been granted.
In the farmout agreement signed in November 2012, it was announced that $60 million would be spent on Stage 1, split between $48.5 million on the Queensland permits and $11.5 million on the NT permit. It was also agreed that Total would fund the first 80 percent of costs, with Central paying the remaining 20 percent.
Under the agreement announced today, Stage 1 expenditure will now be approximately $95 million (AUD 105 million) with the additional funding of $35 million to be spent on the Queensland permits. This effectively brings forward expenditure planned for the Stage 2 and 3 programs, with total expenditure for the 4-year exploration program remaining unchanged at $190 million. The structure of the farmout is also unchanged, with Total having the option to attain Operatorship and hold a 68 percent working interest in the permits once this total expenditure is reached. The increase in Stage 1 expenditure means the farmout deal will likely reach completion before the end of Stage 3.
The increased expenditure in Stage 1 will allow for multi-zone production tests of some wells subject to satisfactory results from the initial Stage 1 core hole exploration program. Undertaking these production tests will increase the JV’s understanding of the unconventional gas potential of the South Georgina Basin.
Total and Central have put aside funds of $11.5 million from the total $190 million program to be spent on the NT permit in the 18 months following the grant of that title. EP(A)132 is currently awaiting the execution of a Native Title Agreement with the Traditional Owners through the Central Land Council.
Notwithstanding the increase in Stage 1 expenditure, the increase in Central’s financial commitment for Stage 1 has again been deferred in timing (i.e. Total is to pay the first 80 percent of the original $48.5 million and the first 80 percent of the additional $35 million). The deferral of Central’s $7 million share in the increase in Stage 1 expenditure (20 percent of $35 million) is currently targeted for mid-2015.
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