farmout to red sky energy, page-5

A third party has emerged as a multi-million dollar contributing lynchpin to aspirations by Perth-based Central Petroleum Limited (ASX: “CTP”) to build a structured energy business around the hydrocarbon and helium potential of Central Australia.
Underpinning the new commitment is an agreement with Central Petroleum by West Perth-based and ASX-listed Red Sky Energy Limited (ROG.AX), via its wholly owned subsidiary, Red Sky Energy (NT) Pty Ltd, to back Central’s oil, gas, underground coal and helium opportunities in a core exploration footprint in central Australia covering over 200,000 km2.
In all, Red Sky Energy will commit via farm-in to becoming a minimum 10% stakeholder in 27 of Central Petroleum’s energy focused permits around the Red Centre.
This will require Red Sky Energy to fund up to 20% of the first three conventional wells in each of the 29 permits, as well as 20% of the first A$3 million of seismic costs incurred for each permit.
Red Sky will also pay to Central Petroleum A$5 million as a series of reserve premiums, for each increment of one trillion cubic feet of gas (TCFG) or oil equivalent (167 mmboe) that may be identified in proved, probable and possible reserves (3P) in each permit.
Central Petroleum’s permits include significant conventional oil/gas as well as unconventional gas and coal seam gas potential. For coal seam gas alone, Central Petroleum’s consultant has estimated a potential gas-in-place within the coals in the Pedirka Basin of between 34 to 70 trillion cubic feet of gas (TCFG) in Prospective Recoverable Resources – Red Sky Energy’s share upon earning its 10% interest would be 3.4 to 7 TCFG.
Central Petroleum’s Managing Director, Mr John Heugh, said the farm-in conditionally committed Red Sky, on average, to a “potentially ranged exploration package” of between A$2.4 million and A$5.6 million seismic and drilling expenditure per permit pursuant to the conditions of the Farmout Agreement executed today.
Central, as majority permit owner, is already partnered across various permit work program commitments around Alice Springs by a 20% stakeholder in many permits, Petroleum Exploration Australia Limited (“PXA”) and a 10% holder, Melbourne-based private resources company, Trident Energy Limited in EP 115 and EPA 111. An additional farmin participant in the Mt Kitty and Magee Prospect blocks is Hen Nuclear Limited, focussed on helium, gas and condensate prospects.
The agreement with Red Sky Energy excludes the region’s EP 97 permit and the 0.8 trillion cubic feet of gas UGIIP, (TCFG) Magee prospect in the Magee prospect block in EP82, which flowed gas, condensate and helium to the surface in 1992; and the Mt Kitty Prospect block (EP 125 Refer map) currently held by Central Petroleum in joint venture with He Nuclear Limited.
The 400 km² 3 TCFG Mount Kitty gas-condensate-helium prospect is estimated to hold a 185 billion cubic feet of gas helium potential in prospective recoverable resources at “high” estimate..
Red Sky Energy’s interest via the farm-in will be held through subsidiary, Red Sky Energy (NT) Pty Ltd, with that commitment unconfined in terms of commodity targeting.
The first proposed targets for the expanded Central Australian consortium cover five coal seam gas wells this year, the 2 TCFG UGIIP Ooraminna prospect in EP82 (and which flowed gas to the surface in 1963); and 1,350 kilometres of seismic across the Amadeus and Pedirka Basins.
The expanded farm-in comes less than three months after Central Petroleum, with Patersons Securities Limited acting as Lead Manager, secured a total gross capital raising of A$31 million via a Rights Issue and Placement.
With 270,000 km² of tenements, Central Petroleum is the largest holder of prospective oil and gas acreage in onshore Australia, with a portfolio that includes the majority of the Pedirka and Amadeus Basins on the SA-NT border, all of the known Lander Trough north of Alice Springs and 15,000 km² of the Southern Georgina Basin in far west Queensland.