MEO Australia Ltd. announced Monday that it has reached an agreement to assign its 50 percent interest in the WA-454-P exploration permit in the Bonaparte Gulf, offshore northern Australia to Origin Energy Resources Ltd. following an extensive review of its strategic focus and allocation of capital to the firm's asset portfolio.
MEO had earlier sought an additional partner for WA-454-P to minimize its remaining exposure to overall exploration and drilling costs, but this was not possible due to the current depressed farm-out market. The company believed that WA-454-P no longer had the risk-reward profile that matched the its strategic objectives, which have increasingly moved towards lower cost onshore projects such as the Block 9 Production Sharing Contract in Cuba.
In 2013-2014, MEO received $4.2 million (AUD 5.6 million) in cash payments from Origin under the original farm-out agreement for WA-454-P.
The agreement includes provisions to effectively back-date the assignment to December 2015 as consideration for MEO’s 50 percent interest, allowing MEO to avoid all expenditure associated with WA-454-P in 2016 and 2017, when an exploration well is obligated to be drilled and substantial expenditure incurred. When the transaction is completed, Origin will hold a 100 percent stake in the permit.
"While it is disappointing to walk away from WA-454-P, the Company believes this is the most appropriate course of action given current cash reserves and macroeconomic factors. The exploration savings from the withdrawal enables MEO to focus on its lower cost and higher priority project, Block 9, onshore Cuba," MEO Managing Director & CEO Peter Stickland said in the press release.
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