The total estimated expenditure to be funded by Avery for the program is over $5 million within 12 months after the execution date of the Farmin Agreement.
Avery has agreed to drill two wells in ATP 709P (Part 5) in Australia's Surat-Bowen Basin. In addition, it will acquire 80-100 sq. km. of 3D seismic data to earn a 50% working interest in ATP 709P (Part 5) and an option to participate at a 50% working interest level in drilling two new wells in the Taylor Oil and Gas Field area.
ATP 709P (Part 5) contains the Rockhampton High-1 oil discovery and two oil prospects, the Permian Tinowon Sandstone and Triassic Rewan Formation Freneau Prospect and the Triassic Showgrounds Armstrong Prospect both located east of the Taylor Oil and Gas Field.
Mosaic believes the proposed farmin 3D seismic data acquisition program will significantly reduce the appraisal/development risk of future Taylor area wells.
The Taylor Oil and Gas Field has produced over 16 BCF (billion cubic feet) of gas and 1.8 MMBbl (million barrels) of oil/condensate from the Triassic Showgrounds Sandstone. The remaining upside potential (3P) of over 8 BCF of gas and 1 MMBbl of oil/condensate requires additional wells to confirm and produce.
Terms of Avery Farmin
Mosaic remains the Operator of the Farmin areas during and after the farm-in period. Mosaic retains its 100% interest in all existing Taylor Field wells.
Upon the completion of this farmin program, Mosaic's working interest in ATP 709P (Part 5) will be reduced from 100% to 50%, and working interest in the future wells drilled within the new Taylor Field 3D seismic coverage will be 50% if Avery exercises its option.
The specific terms of the Avery Farmin offer include:
--Avery to pay MOS $230,000 for approximately 50% of the costs of the recently acquired 2D seismic data in ATP 709P (Part 5). --Avery to fund the drilling of two wells in ATP 709P (Part 5) within twelve months of the signing of the Farmin Agreement to earn a 50% working interest in ATP 709P (Part 5). --Avery to fund the acquisition of an 80-100 square kilometer 3D seismic survey over the Taylor Oil and Gas Field area to earn an option to participate at a 50% working interest level in drilling new wells in the area covered by the new 3D seismic dataset. Seismic acquisition shall be conducted within 180 days of the signing of the Farmin Agreement. The option to participate in the drilling of two wells at a 50% participating interest level in the 3D seismic area must be exercised within six months after receipt of the final processed 3D seismic dataset.
Farmout deals attract more than $10 million in expenditure commitments
The farmout deal is the continuation of Mosaic's strategy of farmouts to better manage risk and accelerate exploration and production in the company's Surat-Bowen Basin asset portfolio.
Mosaic's Managing Director, Mr Lan Nguyen said: "We welcome Avery as our new joint venture participant, and look forward to a successful exploration and development program with Avery.
"The estimated firm expenditure of over $5 million to be funded by Avery for the seismic acquisition and the drilling of two firm ATP 709P (Part 5) farmin wells clearly demonstrates their recognition of the excellent oil and gas prospectivity of the area."
In the last twelve months, three farmout deals (including this one) have attracted more than $10 million of current and future expenditure commitments net to Mosaic for the costs of the 2D and 3D seismic acquisition and the drilling of at least six wells.
The first farmout well to Ausam, Downlands-4, was a successful gas well and will generate cashflow for Mosaic in April 2007.
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