re: Ann: 09.10.19 GSA Exercises Pre-emptive R... finally something new guys. some news to digest before the bg saga again. seriously.
GSG EXERCISES PRE-EMPTIVE RIGHTS OVER EIR OFFER TO FARMIN TO EPA 130
The Company refers to its announcement to the ASX of 11 August 2009, in which the Company
announced that it had agreed a term sheet with Energy Infrastructure and Resources Limited
("EIR") in connection with Exploration Permit (EPA) 130. EPA 130, conditionally, and subject to
grant, is currently held as to 80% by Merlin Energy Pty Ltd ("Merlin") (a wholly owned
subsidiary of the Company) and 20% by Great Southern Gas Limited ("GSG").
The term sheet between EIR and the Company provided for EIR (or its nominee) to earn a 25%
stake in EPA 130 by way of a farm-out of part of the interest currently held by Merlin (the
"Farm-Out Interest"). In respect of the 25% stake, EIR would be required to fund 60% of initial
work programmes of $3 million of seismic and 3 conventional wells or deemed non
conventional equivalent drilling (a 2.4:1 "promote") and pay a "Reserve Premium" of
$10,000,000 indexed to certain industry sale benchmarks for each incremental trillion cubic feet
of gas (TCFG) or oil equivalent, which may be discovered and independently verified at 3P
reserve level (proved, probable and possible) on an ongoing basis.
Pursuant to the existing Joint Operating Agreement between the Company, Merlin, GSG and
others, GSG has a pre-emptive right in respect of a proposed disposal of an interest in EPA
130 by the Company in the present circumstances.
On 16 October 2009, the Company received written notice from GSG that, in accordance with
the terms of the Joint Operating Agreement, GSG exercises its pre-emptive right in connection
with the Farm-Out Interest. The agreement between Merlin and GSG resulting from that pre-
emption is on the same terms as the terms sheet between EIR and the Company, which is
referred to above and was the subject of the earlier announcement. This includes that the
agreement is subject to the approval and execution by the relevant Boards of the detailed terms
of a definitive formal farmout agreement.
If the acquisition of the Farm-Out Interest occurs, GSG will hold, in aggregate, a 45% interest in
EPA 130, and Merlin a 55% interest.
This arrangement will result in GSG providing 100% of the funding required for the initial
exploration programme to earn a cumulative 45% of EPA 130 with Merlin retaining a
participating interest of 55% at the conclusion of the initial $3 million of seismic and 3 wells.
GSG is an unlisted public company, which is held by EIR as to 70% and Petroleum Exploration
Australia Limited (“PXA”) as to 30%.
This proposed transaction is for practical purposes unrelated to the current dispute between the
Company and PXA concerning the broadacre Joint Venture between the two companies.
Sincerely
John Heugh
Managing Director
Central Petroleum Limited
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