Rey Resources to Acquire Backreef's 50% Interest in WA's Derby Block
Rey Resources Ltd. (Rey or the Company) announced Friday that its subsidiary company Rey Lennard Shelf Pty Ltd. (RLS) has entered into an agreement with Backreef Oil Pty Ltd. (Backreef) to acquire a 50 percent interest in petroleum exploration license EP487, the "Derby Block", located in the Canning Basin of Western Australia (the Agreement) subject to certain terms and conditions.
The Derby Block is a large exploration license of approximately 1,930 square miles (5,000 square kilometers) that was recently granted to Backreef (50 percent) and Oil Basins Ltd. (50 percent). It occurs to the north of Rey's existing interests in petroleum exploration licenses in the Canning Basin.
The Company considers EP487 to be prospective for hydrocarbons and look forward to working with Oil Basins to develop the Derby Block.
Backreef and Oil Basins are currently in dispute over Backreef's interest in the Derby Block and certain unpaid cash calls that have occurred between the parties since 2012.
Key Terms of the Agreement
Under the Agreement, RLS will acquire Backreef's 50 percent interest in the Derby Block (for either at RLS's election):
- $1.7 million (AUD 2 million), to be paid on the grant of a Production License in respect of EP487; or
- a 2 percent royalty on future production
The Agreement is subject to certain conditions precedent, including:
- conditions to RLS's satisfaction, of ongoing hearings in the State Administrative Tribunal (SAT) of Western Australia where Oil Basins is currently seeking to have Backreef's grant of title in EP487 by the WA government overturned. This is expected to conclude in January 2015
- termination or expiration of existing agreements to sell the Derby Block to third parties; and
- FIRB approval
RLS will also assume the conduct of, and bear the cost of, the SAT proceedings and outstanding legal claims on Backreef by Oil Basins in the WA District Court and Magistrates Court in connection with the expenses incurred on the management of the Derby Block to date. RLS will have the ability to terminate the Agreement and be relieved from any obligation to conduct and bear the costs of these proceedings at any time on the giving of 14 days' notice to Backreef.
It is expected that, on completion of the acquisition, RLS and Oil Basins will form a joint venture to develop the Derby Block.
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