Australian oil and gas company Cue Energy has agreed to sell equity in exploration permits WA-359-P and WA-409-P in the Carnarvon Basin, offshore Australia, to Beach Energy.
Cue Energy said on Wednesday that the sale of equity in the two blocks, which contain the giant Ironbark gas prospect, was made through its 100%-owned subsidiary Cue Exploration Pty Ltd, and is subject to conditions and approvals.
Under the terms of the agreement, Beach will acquire 21 percent equity in the block and free carry Cue for four percent of the cost of drilling the Ironbark-1 exploration well. Beach will also reimburse Cue with $900,000 for past costs.
The agreement is conditional on BP exercising its option to acquire 42.5% equity in WA-359-P, Cue obtaining an extension to the current permit end date, and other customary approvals.
To remind, BP was given more time in early October to decide if it wants to take the equity. The oil major has until December 11 to decide.
WA-409-P equity option
Cue also granted Beach an option over 7.5 percent equity in exploration permit WA-409-P, adjoining WA-359-P. If Beach exercises the option, it will free carry Cue for 7.5 percent of the costs of drilling a well in the block.
The company will also receive a 10 percent royalty on all future revenue from Beach’s 7.5 percent equity in the permit. The option may be exercised until July 2019.
Ironbark is a giant Mungaroo Formation prospect that is mapped with an area of up to 400 square kilometers and a best technical estimate of 15 Tcf of prospective recoverable gas resources based on an internal assessment performed by Cue.
The prospect is less than 50 kilometers from the North Rankin platform and near Pluto and Wheatstone LNG infrastructure.
Cue CEO, Matthew Boyall, said: “These agreements are another major step forward in securing partners and funding to drill the Ironbark well. They display the confidence that another major company has in Cue’s Ironbark prospect. Including the BP 42.5 percent option, Cue has now conditionally secured 75 percent of the funding for the Ironbark-1 well and retains potential long-term value from any success in WA-409-P through revenue royalty.
“Cue currently retains 36.5 percent uncommitted equity in WA-359-P, and we continue to talk to companies interested in forming a joint venture together with Beach and BP to share in this high impact opportunity.”