In the event of success at Artemis, MEO will receive an...

In the event of success at Artemis, MEO will receive an additional cash bonus of US$31.5M
and be carried through two additional wells.
The agreement took much longer than expected, largely because this represented a new
country entry for Petrobras. As such, the legal and commercial due diligence was extensive.
Additional agreements were required to be negotiated between the Joint Venture parties to
establish the principles for commercial development in the event of exploration success.
openbriefing.com
What is the scope and size of any planned drilling program for the permit and Artemis in
particular? What are the key areas of prospectivity the campaign will be targeting?
MD & CEO Jrgen Hendrich
The permit work programme obligation includes the drilling of one commitment well in the
current Permit Year expiring on 31st January 2011. Thereafter, the permit has one further
year to run prior to its renewal. We are have secured an option over a drilling rig and are
planning to drill the Artemis-1 well later this year.
Artemis-1 will target two Jurassic aged reservoirs with combined mean prospective resources
of approximately 12 Tcf. In the event Artemis-1 discovers a resource of this size, a standalone
LNG development could be justified.
openbriefing.com
The first well is 100%-funded to a cap of US$41M. Subsequent wells are capped at US$62M
per well. Why is there such a marked difference in cost estimations? What happens if the
funding cap is exceeded?
MD & CEO Jrgen Hendrich
Funding caps are typical in farm-in agreements. The first well is designed not to be
production tested. Subsequent wells will likely be appraisal wells and include full production
tests, hence the higher caps.
For funding contributions in excess of the caps, these are on a pro-rata basis. In the case of
the first well, since our pre-existing JV partners are free carried, MEO will contribute 50% of
the costs above the cap. In the case of the follow-up wells, MEO will contribute 20% of any
cost over-runs above the US$62M caps.
openbriefing.com
Following the farm-in MEOs interest in WA-360-P is 20%. What will be MEOs ongoing
obligations toward the development of the permit and any future exploration program(s)?
MD & CEO Jrgen Hendrich
WA-360-P is in currently in Permit Year 5 which requires an exploration well to be drilled.
Artemis-1 is the proposed commitment well. Permit Year 6 involves studies. At the
conclusion of Permit Year 6, a renewal application will be made that involves a mandatory
50% relinquishment and a new five year work program that will depend on the assessed
prospectivity of the Permit. In the event of success at Artemis, an appraisal drilling program is
likely, however is subject to Joint Venture approval.
Open Briefing | MEO Australia Limited | 15 April 2010 3
openbriefing.com
Despite having no previous Australian experience, Petrobras was selected as your preferred
farminee. What was important to MEO in choosing a partner to develop the permit? What
attracted Petrobras to the project? What experience do they bring to the potential future
offshore development of WA-360-P and Artemis?
MD & CEO Jrgen Hendrich
The Artemis prospect is of sufficient size to underpin a stand-alone LNG development in the
event of success. MEO sought to attract a partner with the financial capability to undertake a
stand-alone LNG project. In particular, MEO sought a partner with independence from
existing and planned LNG projects to ensure the best commercial outcome for the Joint
Venture in the event of exploration success.
Petrobras is a recognised global leader in deep and ultra-deep water developments. Although
water depth at Artemis is not challenging, Petrobras brings these same technical skills to the
WA-360-P Joint Venture that underpin this global leadership.
Offshore Australian exploration acreage, particularly for LNG size exploration prospects is
very tightly held. MEO knew that to in order to attract a high calibre partner, it had to offer
significant equity (i.e. 50%) in a high quality, material gas prospect (i.e. ~12 Tcf) in
strategically located acreage (WA-360-P) relative to existing (NWS Gas Project) and proposed
(Pluto and Wheatstone) LNG infrastructure on attractive terms.
openbriefing.com
The completed farm-in agreement on WA-360-P significantly de-risks the Artemis project for
MEO, both technically and financially. What are your plans for growing shareholder value?
What are the immediate priorities?
MD & CEO Jrgen Hendrich
MEOs immediate priorities are to engage our new partner in the process of planning for and
drilling the Artemis-1 well. We need to secure the necessary regulatory approvals (including
Foreign Investment Review Boar FIRB) for the farm-in. Thereafter we need to commit to a
drilling rig (we have secured an option) and finalise the Artemis-1 well location.
Elsewhere in our portfolio, we are in the process of renewing our 100% owned Timor Sea
exploration permit NT/P68 for a further 5 years. We have some further technical work to
undertake prior to undertaking a farm-out to secure a funding partner to appraise our two
gas discoveries on the Heron and Blackwood structures. These discoveries have the potential
to underpin one or more of our proposed gas processing projects the Timor Sea LNG
project and Tassie Shoal Methanol project both of which have received their
Commonwealth Environmental Approvals.
Separately we continue to discuss our plans for a regional gas development hub on Tassie
Shoal with the gas resource custodians and Government representatives with an interest in
resource development.
Late in 2009, we commenced a more active New Venture screening programme and
identified a number of attractive opportunities to add to our portfolio. Execution of one or
more of these opportunities required us to complete the farm-in first.