It's been a long and at times frustrating wait for shareholders in oil and gas junior MEO Australia but there's likely be smiles all around among the company's investors this morning.
MEO has finally minted its joint venture over the potentially huge Artemis gas prospect off north-west Western Australia, securing - as has been widely speculated - Brazilian giant Petrobras as its partner.
While the clout Petrobras brings is significant, the terms should also be pleasing.
As had been expected, Petrobras will earn a 50 per cent stake in the prospect by funding 100 per cent of the cost of a first well to a limit of $US41 million ($44 million).
In the event of a discovery, Petrobras will also cover MEO's share of costs on up to two more wells to a limit of $US62 million per well.
The real kicker, however, is the bonus payments to MEO. In addition to being refunded MEO's past costs at the project of around $US7.5 million, Petrobras will pay MEO a $US31.5 million cash bonus, representing a decent payday irrespective of whether the exploration is a success.
It will pay that amount again in January 2011 if it goes ahead with the additional two wells.
MEO shareholders had originally been promised a farm-in partner for Artemis by September, but there has been a series of largely unexplained delays.
Artemis has been interpreted as capable of hosting up to 12 trillion cubic feet of gas, which would make it a monster field capable of supporting a stand-alone LNG development.
MEO will be left with a 20 per cent interest in the project, while CUE Energy and Moby Oil & Gas will hold 15 per cent each.
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There was another article on MEO's Tassie Shoals project on 26 March
Santos sale could be boost for MEO 26 March 2010
Santos' $200 million sale of its Evans Shoal gas field in the Bonaparte Basin off northern Australia is arguably a bigger deal for junior player MEO Australia than it is for Santos.
Santos will receive $100 million upfront from Nasdaq and ASX-listed Magellan Petroleum, plus potentially two further payments totalling $100 million, in exchange for its 40 per cent interest in the project.
While that selling price is less than the $285 million that Deutsche Bank analyst John Hirjee had valued the stake at, he said the outcome was fair given the high CO2 content of the field's gas and the lack of firm development plans. The cash should also go a small way towards easing Santos' financing issues for its LNG projects.
Where MEO fits in is with its Tassie Shoals project nearby.
Tassie Shoals is a unique play - the shoal itself is an old, broad coral reef sitting just below the surface in the middle of the Timor Sea. The water around it is substantially deeper.
MEO has long advocated building an LNG facility atop pylons at Tassie Shoals, taking advantage of the unique shallowness of the reef. The facility proposed by MEO - which has environmental approvals - would also include a facility which would take the CO2 in the gas and turn it into methanol.
The one not-insignificant problem for MEO is that it doesn't have a jot of gas, and needs to engage with the Evans Shoal owners. On that front, Santos has not been cooperative.
MEO has its hands full with the farm-out of its Artemis gas prospect but the company will no doubt be hoping to speak very soon to Magellan in the hope of working together.
MEO will be buoyed by the fact Magellan singled out the prospect of methanol production when announcing the deal today. Magellan also said it had agreements with one of the world's largest methanol producers covering feasibility studies in the area of Evans Shoal, but no further details were given.
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Apologies if you have already seen these articles.
MEO Price at posting:
45.5¢ Sentiment: LT Buy Disclosure: Held
