Rey Resources Acquires 50% Stake in Derby Block in WA's Canning Basin
Australia's Rey Resources Ltd. (Rey or the Company) disclosed Tuesday that further to its announcement of March 18, the firm is pleased to announce that its wholly owned subsidiary company Rey Lennard Shelf Pty Ltd. (RLS) has completed the acquisition of a 50 percent participating interest in petroleum exploration permit EP487 (the Derby Block) from Backreef Oil Pty Ltd. (Backreef). The Company has also entered into a Joint Venture Agreement (JOA) with Oil Basins Limited (Oil Basins), holder of the remaining 50 percent interest, for the operation of exploration programs on the Derby Block, located in the Canning Basin of Western Australia.
The Derby Block is a large exploration license of approximately 1,931 square miles (5,000 square kilometers) that was granted to Backreef (50 percent) and Oil Basins (50 percent) in 2012. It occurs to the north of Rey’s existing interests in petroleum exploration licenses the Canning Basin.
Managing Director Kevin Wilson said: “The acquisition of a 50 percent interest in the Derby Block extends the Company’s footprint into acreage we consider prospective for both conventional and unconventional hydrocarbons. The Derby Block also has some of the best existing access infrastructure in the region, enabling relatively straightforward mobilization activities. We look forward to working with Oil Basins to explore EP487.”
Key Terms of the Acquisition Agreement
Pursuant to the acquisition agreement with Backreef, RLS has acquired Backreef’s 50 percent interest in the Derby Blocks for $1.5 million (AUD 2 million), to be paid on grant of a Production License or, at Rey’s election, a 2 percent royalty on future production. RLS has also agreed to settle certain outstanding claims on Backreef by Oil Basins in connection with past expenses incurred on management of the Derby Block amounting to approximately $298,255 (AUD 391,000) and grant Oil Basins a 0.5 percent royalty over future production from RLS’ interest. The settlement of these claims has resulted in termination of all outstanding legal action between the parties.
Key Terms of the JOA
RLS and Oil Basins have entered into a JOA with the following key terms:
- Oil Basins will act as operator until Jan. 1, 2016, at which time RLS will assume operatorship of the Derby Block, subject to certain preconditions;
- until Jan. 1, 2016, Oil Basins will seek to farmout an interest in the permit and Rey will participate in the farmout subject to certain commercial terms being achieved, including funding of the first two years’ of the permit workplan on a 2 for 1 basis. This would result in both RLS and Oil Basins diluting to a respective 25 percent interest with the farminee at 50 percent; and
- other terms and conditions usual for an agreement of this sort
Oil Basins, as operator, is progressing the acquisition of seismic to meet the current permit work commitment.
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