Kea Gets Approval to Farm Out 30% Stake in PEP 51153 Offshore NZ to MEO
Kea Petroleum plc, the oil and gas company focused on New Zealand, disclosed Friday that New Zealand Ministerial Consent has been granted to the transfer of a 30 percent participating interest in PEP 51153 offshore New Zealand to MEO Australia Ltd (MEO). This consent represents the final condition to approve the transfer under the staged farm-out agreement (the Agreement) announced April 7.
The PEP 51153 permit (the Permit) covers an area of 40.3 square miles (104.4 square kilometers) situated onshore along the Eastern Margin of the Taranaki Basin, New Zealand's prolific hydrocarbon province.
Under the Agreement, MEO will earn a 30 percent interest in the Permit in return for funding $3.45 million, or NZD 4 million, (80 percent) of a $4.31 million (NZD 5 million) first phase work program (Phase 1). Phase 1 is intended to boost existing production and assist future field appraisal and involves a workover of the existing two Puka wells and drilling of a new well (Puka-3) from the existing pad with the objective of further increasing production and appraising the anticipated primary channel sand identified on the recent 3D seismic survey. Phase 1 also involves further testing of the suspended Douglas-1 well. The testing program will be designed to definitively test the Tikorangi Limestone and to confirm log pay in the northern extension of the Puka field at the lower Mount Messenger level. Phase 1 is intended to commence by the end of June 2014.
Upon assessment of the results of Phase 1, MEO can elect within 6 months to earn an additional 20 percent participating interest in the Permit by funding $6.47 million (NZD 7.5 million) of a $7.77 million (NZD 9 million) second phase work program (Phase 2). Phase 2 is intended to further appraise and commercialize Puka by developing a surface location from which the central portion of the field can be accessed. Further wells, potentially including horizontal wells, are planned to be drilled and tested from this location to assist with field appraisal, reserves certification and design of a full field development plan. Upon completion of Phase 2, which will also involve the establishment of permanent production facilities, MEO will have earned a 50 percent interest in the Permit.
Both work program phases are designed to move the discovery towards full field development in 2016 by reducing uncertainties in relation to resource size and recovery. At the conclusion of Phase 1 or 2 the parties have agreed that MEO has the option to enter into negotiations to acquire KEA's remaining interest in the Permit.
Commenting, Ian Gowrie-Smith, Kea Petroleum's chairman, said:
"We are delighted that the Minister has approved the transfer of equity and we look forward to a prosperous partnership with MEO."
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