Mosman Oil and Gas Limited, the New Zealand and Australia focused oil exploration and development company, provided Monday an update on the proposed acquisition of the South Taranaki Energy Project (STEP) in New Zealand from Origin Energy Limited (Origin) (the STEP Acquisition) and on operations at Murchison.
In relation to the STEP Acquisition, the Board has determined that while STEP remains a good asset with long term development potential, the STEP Acquisition no longer meets Mosman’s investment criteria at current oil and gas prices and the Sale and Purchase Agreement has been cancelled. Origin has agreed to repay the deposit of $327,300 (NZD 500,000) which will be transferred back to Mosman shortly. The joint venture arrangement with High Peak Royalties Limited will be terminated; and the Ridge Royalty Limited royalty agreement will not proceed.
John W Barr, executive chairman of Mosman commented: “After months of work by the Board, staff and consultants on STEP, it is extremely disappointing that the state of the global economy and specifically the oil price has led to this outcome. Mosman intends to minimize expenditure to preserve cash and asset values, with the immediate priority now being to focus on our other projects and continue to evaluate new opportunities.”
The Company announced on Jan. 5 the issue by Mosman of a Review Notice in accordance with the terms of the sale and purchase agreement for the STEP Acquisition (SPA). The Review Notice was triggered as a result of the fall in the Brent oil price moving below $40 per barrel on Dec. 10, 2015.
Mosman notes that the oil price remains depressed and volatile and there is a diverse range of opinions as to the short-term and medium-term oil price predictions from market commentators. In addition, global equity markets remain impacted by ongoing uncertainties. These circumstances are materially different to those in place when the SPA was signed and announced on Sept. 3, 2015.
The results of negotiations with Origin did not lead to a change of purchase price nor conditions. Additionally, Mosman has not yet received the government approvals that are necessary pre-conditions to be able to complete the STEP Acquisition. Certain issues have been raised by NZPAM including the capability to guarantee the decommissioning liability that would occur at the completion of production operations.
Operationally, Mosman awaits NZPAM approval to commence the previously announced LIDAR survey proposed for the Murchison permit in New Zealand's South Island. Pending results of the survey and other factors, the work program and timing of drilling at Murchison is now under review. A similar review process is being conducted for all exploration assets.
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