Hi superyachtThere is no need to shout, I was just trying to...

Hi superyacht

There is no need to shout, I was just trying to clarify your question.

IMO further drilling in WA-360-P depends on a number of factors which aren't quite clear yet.

Let me explain.

The farmin by PBR is dependent on large quantities of gas being found in WA-360-P.

The first wildcat well at A#1 did not provide that. So, for PBR to continue with an interest in the permit MEO has to somehow prove the existence of gas.

Additional seismic data will not be enough. They have the core of A#1 to study.

This is where I don't quite understand the mechanics of the deal. Because A#1 was a duster PBR are not bound to the bonus payment by Jan 2011 and are not bound to the second and third wells.

However, according to the agreement lodged with the WA Department of Mines (DMP) if PBR decide to drill a second and third well the bonus payment of $31.5m will be triggered along with the free carry of 20% MEO costs in the 2nd and 3rd wells.

This carries on for the remaining period of the present permit lease. 2011 is the final year. This means that MEO have a year from Feb 2011 to determine whether or not there is sufficient gas in the lease to keep PBR interested.

Even after year six of the present lease, PBR can elect to retain its Participating Interest in the permit when it is lodged for renewal. The wording of the agreement in this instance states:

'If the Farmee (PBR) elects to retain its Participating Interest after year 6 of the permit. If the work program for the renewal of the Permit includes a well in the primary or secondary term the Farmee is required to pay the remaining consideration and the Farmor's (MEO) share (20%) of the second and third wells. (Clause 5.3 (d) (1), (2) & (3)).'

Carnarvon leases are quite valuable so I think a renewal will be on the cards. Whether or not PBR will stay interested is another question.

So this is part of how good the deal was with PBR. The only thing we need is the gas - so how do we go about proving there is gas in the permit.

Does MEO go it alone on a sole drill? I don't think so.

CUE and MOG have used up their free carry so how does this affect CUE and MOG - have they lost interest to the point that they will relinquish/sell their share of the permit?

Or will they pay their share of the costs of another well as their free carry has been used up?

And if there is another well will PBR pay their 50% participation until there is sufficient success for PBR to take over as operator, drill the 3rd and 4th test wells and trigger the bonus payment?

Also, if PBR chose the site of A#1 who will choose the site of A#2 if we go down that track.

Will PBR walk away and MEO get their 50% back to own 75%. PBR will probably want some sort of compensation in this scenario.

If MEO get the 50% back will they look for another farmin deal as is likely for 361-P.

There are so many questions and I am eagerly awaiting the answers. I don't think I will get the answers overnight.

Basically, all we need is success in 360-P, which is proving difficult, if not impossible.

BTW you need to register on the DMP website for access to the permit details if you want to DYOR and confirm the details of the farmin agreement yourselves.

Their website is here.

The A#1 drilling is over now with extremely disappointing results to say the least. The next point of interest is the Heron farmin and the drilling in an area which we know does have gas.

We will have to wait and see.

#:>))