Karoon Gas Australia has entered into a binding sale and purchase agreement for Pacific Exploration and Production Corp.’s 35% equity interest in the jointly held Santos Basin exploration blocks S‐M‐1037, S‐M‐1101, S‐M‐1102, S‐M‐ 1165 and S‐M‐1166 for up to $20.5 million.
Karoon already had 65% interest in these five blocks and will now become 100% owner and operator of the blocks.
The agreement to acquire the 35% interest follows Pacific’s application for insolvency protection with the Superior Court of Justice in Ontario, Canada during April 2016.
Under the terms of the agreement, the consideration is payable by Karoon as follows: An upfront cash payment of $15.5 million payable on completion; and a deferred contingent payment of $5 million payable upon first production reaching a minimum of 1 million barrels of oil equivalents from the blocks.
The agreement remains conditional upon, among other things, approval from the Petroleum Regulator, the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis and an approval order from the Superior Court of Justice in Ontario.
Karoon’s Managing Director, Robert Hosking, said: “The acquisition of Pacific’s interest in the Blocks maps a clear path forward for Karoon to introduce a new funding partner to progress the Echidna discovery appraisal drilling campaign.”
“We are pleased to announce this sale, which will improve our cash position, decrease our exploratory commitments and provide additional flexibility,” commented Dennis Mills, Chair of the Independent Committee of the Board of Directors.
“This transaction is aligned with the long-term interests of the Company which is to improve liquidity and best positions the Company to navigate the current oil price environment.”