Exploration Australia Limited Perth, Feb 15, 2008 (ABN Newswire) - Central Petroleum Limited, ("Central")(ASX: CTP) - operator of Australia's largest onshore acreage holding - has executed a formal Farmout Agreement and Joint Operating Agreement with Sydney-based Petroleum Exploration Australia Ltd. ("PXA") to jointly finance a major seismic and drilling program in the Northern Territory.
The formal Farmout Agreement, Joint Operating Agreement (and various ancillary documents as conditions precedent) define and crystallise the terms of a conditional Memorandum of Understanding (MoU) signed up by the Parties on 31st May 2007.
The extensive time taken to formalise the conditional MoU, which was subject to board approval to proceed to a formal agreement, was occasioned by complexities associated with the large number of permits, applications in various states of progress towards grant, the involvement of various regulatory authorities and the negotiation of a firm work programme for 2008, further detail of which will be the subjects of ongoing announcements. The firm programme is planned however, subject to any operational contingencies, to include the drilling of 4 conventional wells, 3 Coal Bed Methane (CBM) wells and a c.1,150 km 2D seismic acquisition programme which has already commenced as well as a 30,000 km2 gravity survey over SPA 7/04-5 in Western Australia. Additional drilling options for a further 3 conventional wells have been agreed.
Under the agreement, PXA will fund 40% of pre-drilling seismic acquisition, up to a limit of A$3 million per permit; and 40% of the cost of drilling up to three exploration wells in each of Central's permits numbering 27 in a mix of 9 granted permits and various applications. The exploration package spans an area of c.250,000 km2 in 4 distinct sedimentary basins (the Amadeus, Pedirka, Lander Trough and Georgina basins). These areas have received very little exploration attention for decades due to their relative isolation and sustained low oil and gas prices. Central's push for control of the petroleum potential of central Australia began in 1998 when oil was trading at US$12/bbl and there was little interest by other companies in these vast tracts of prospective ground.
PXA may retain a 20% participating interest in each of the prospects drilled and their corresponding permits. Should PXA cease expenditure prior to the completion of the full exploration programme in any permit, it shall retain a 20% interest in any producing field it has contributed to the discovery well upon provided it is compliant at the time with any seismic programme approved by the Joint Venture Operating Committee. Subject to the compliance with the seismic programme as outlined, PXA may also retain an incremental interest of 6 and 2/3% interest in the relevant permit for each well it contributes to in the first three wells leading to a maximum 20% participating interest in the permit concerned.
If PXA were to contribute to the maximum extent possible under the agreement, it would be funding a total of up to $32 million of seismic costs and c.$130 million to the drilling of up to 81 exploration wells based on conventional targets. The partners have agreed to "deem" the expenditure of $2 million increments of Coal Bed Methane (CBM) or tight gas sand/shale exploration drilling as each equivalent to one conventional well for the purposes of earning interests in relevant permits where relevant.
An initial four well drilling program during 2008 is planned to target the Blamore and Simpson oil prospects, and the Ooraminna and Mount Kitty gas and gas/condensate/Helium prospects respectively which jointly may host up to 260 MMbbls oil in Undiscovered Oil Initially in Place (UOIIP "high" estimate) and up to 4.9 TCFG and 185 BCF of Helium in Undiscovered Gas Initially In Place (UGIIP "high" estimate). 3 CBM wells are also planned as firm commitments targeting the initial exploration phase for 34-70 TCFG in CBM Recoverable Prospective Resources assessed independently last year in the Pedirka Basin.
Commenting on the PXA farmout, Central's Founding and Managing Director, Mr. John Heugh, said, "The formalisation of our farmout agreement with PXA marks a key milestone in our corporate development. Backed by our recently secured A$80 million rolling bond facility, the recent appointment of seasoned veteran, Randy Frazier, as General Manager (Drilling, Operations and Production), the early appointment of Northern Territory geology guru Greg Ambrose as Manager-Geology and the Board of Directors with over 150 years of relevant experience, Central is now in a good position to actively explore, drill and develop our extensive prospective acreage in 2008 and beyond."
PXA is a start-up oil junior founded by successful Sydney-based resources financier Mr. Barry Dawes, Managing Director of stockbroking firm, Martin Place Securities. Mr. Dawes is also the co-founder of He Nuclear Limited with Sydney-based lawyer, Mr. Ian Mutton.
In addition to exploration for valuable Helium and wet gas (condensate) in the Mount Kitty and Magee prospects (Ordiv Petroleum, Helium Australia and He Nuclear JV), Central and PXA also plan to jointly target other prospects, including the Avalon, Guinevere, Vivienne, Johnstone, Surprise, Stuart and Gypsum oil prospects and the Waterhouse gas prospect.
To date, there have been only 37 exploration wells drilled in the Amadeus basin, which yielded three discoveries totalling 150 million barrels of oil equivalent. Central is exploring for conventionally reservoired oil, gas and Helium targets in the Amadeus Basin and oil and CBM in the Pedirka Basin.
According to the Northern Territory Geological Survey, the Amadeus basin alone could host up to 35 Tcf of gas or 6 billion barrels of oil equivalent of oil and gas in potential resources in place while 34-70 Tcf of CBM in recoverable prospective resources have been described by independents in the Pedirka basin.
Mr Barry Dawes said "The long-held concerns of Martin Place Securities over global energy production and security of supply issues are clearly being reflected in today's high oil prices. Australia is not immune from these matters and its long term liquid fuels requirements will need increased supply from domestic sources through conventional exploration and development as well as through gas to liquids and coal to liquids.
The Amadeus and Pedirka Basins have been thoroughly reviewed technically over the past 16 years since the last exploration well and now offer outstanding opportunities for oil and gas prospects through new concepts, reappraisal of previous work and the new seismic generated by Central. The target structures are large and the petroleum systems are sufficiently attractive to warrant investment in these exciting frontier projects. PXA looks forward to an extended period of activity in the Northern Territory and South Australia with Central Petroleum."
About Central Petroleum Limited
Central Petroleum is a ASX listed junior exploration and production company operating what is regarded as the biggest package of prospective acreage in Australia. The Company gained admission to the Official List of the ASX on March 3rd 2006 with shares and options commencing to trade on Tuesday the 7th March.The acreage has been assembled since 1998 when the Company was first formed as Merlin Synergy NL.
Contact
John Heugh TEL: +61 8 9474 1444
CTP Price at posting:
8.5¢ Sentiment: LT Buy Disclosure: Held
