Under the agreement, AWE will fund 15% of the costs of drilling the Magnolia 1 well in AC/P32 on the same terms as Adelphi's farmin agreement with Norwest Energy NL and Bounty Oil and Gas NL.
These farmin terms include an overall cap based on a total gross well cost of US$8 million. Accordingly, AWE's farmin cost obligation is up to US$1.2 million, with Adelphi's remaining maximum farmin cost exposure reducing to US$1.8 million. Any well costs in excess of the farmin cap will be funded by both companies in accordance with their respective interests in the joint venture.
The agreement is conditional on the completion of documentation and government and joint venture approvals. The date for satisfaction of these conditions is July 31, 2005.
Subsequent to this transaction and the completion of the other recently announced transactions in the permit, the joint venture parties will comprise Coogee Resources as well operator with 20%; Norwest Energy as permit operator with 19.6%; AWE with 10%; Adelphi with 15%; OPIC Australia with 25%; and Bounty with 10.4%.
AC/P32 is located in the Vulcan sub-basin off the coast of Western Australia, and is surrounded by existing oil and gas production and discoveries including Jabiru, Challis, Cassini, Skua, Swift and Montara. The Magnolia prospect is defined by 3D seismic and has the potential to hold 60 to 100 million barrels of recoverable oil. The drilling of the Magnolia 1 well by the Ocean Bounty semisub is now scheduled for July/August 2005.
Commenting on the transaction, AWE's Managing Director Mr Bruce Philips said:
"This transaction continues AWE's strategy of supporting and investing in high quality exploration and appraisal projects in Australia and New Zealand.
"We look forward to working with the AC/P32 joint venturers on this exciting exploration area."
Adelphi's Executive Chairman, Alex Forcke, also said:
"This transaction is particularly pleasing for us in that it has both introduced another highly respected Australian exploration company into the permit, and will also ensure Adelphi's cost exposure to the Magnolia 1 well is appropriate to its resources. Magnolia is a large, high quality exploration prospect with a firm drilling schedule and an experienced operator and has attracted considerable attention from other potential farmin parties.
"Together with the recent appointment of Chris Hodge as Exploration Director, this transaction continues the process of positioning Adelphi as a successful participant in the Australian and international oil and gas sector."
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