Re: ARC acquires further major interests in the Canning Basin
Farmin and share subscription agreement with New Standard Exploration for
blocks in the Kidson Sub-basin.
PERTH, Western Australia: ARC Energy Limited (ASX: ARQ) is pleased to announce
that it has further consolidated its position in the Canning Basin with the acquisition of a
significant portfolio of interests in the southern part of the Basin. The new acquisition covers
some 65,000 square kilometres, nearly doubling the size of ARC’s existing total Canning Basin
portfolio and providing access to new play types in a highly prospective area.
ARC has acquired interests in five blocks, consisting of 4 permits (EP 442, EP 443, EP 450
and EP 451) and one application area (App 9/98-9), all of which are currently held by a private
unlisted company, New Standard Exploration Pty Ltd (NSE).
Prospectivity
The newly acquired interests are mainly located in the Kidson Sub-basin of the Canning Basin.
The Kidson Sub-basin contains a unique petroleum system not adequately covered by ARC’s
current Canning Basin interests. This farmin will provide an opportunity to systematically test
the prospectivity of this petroleum system and the Kidson Sub-basin. ARC’s structured
exploration program in the greater Canning Basin covers each of the other major Sub-basin’s,
with this year’s program targeting the Fitzroy Trough in the north of the Basin where the
Valentine well is currently being drilled.
The petroleum system in the Kidson Sub-basin has never been systematically tested, but
several wells have encountered significant oil columns, and the Sub-basin contains a
widespread salt horizon (the Mallowa Salt of the Carribuddy Formation) which provides a
regional top seal to good source and reservoir rocks beneath. Similar petroleum systems in
the Middle East are extremely prolific. Further details of the geological prospectivity of the
area are set out in the appendix.
Page 2
Farmin Program
In each of the blocks ARC has been assigned a 10% interest and operatorship and will earn
another 35% in each of the blocks at the completion of the acquisition of a total of 1,000
kilometres of 2D seismic data over the blocks. The seismic data will be apportioned over the
blocks so as to satisfy the government work commitments (a total of 800 kilometres) and to
confirm prospects for drilling. It is anticipated the seismic program will be acquired during the
2008 dry season. ARC may then earn up to a further 30% interest in all of the blocks by the
drilling of up to three wells, with a 10% interest being earned upon the completion of each well.
On completion of the three well earning program ARC will hold a 75% interest in each block.
Together with the drilling associated with a farmin agreement that NSE has entered into with
PetroSun for a sub-block from EP442, this program will substantially satisfy the Western
Australian Government’s work program commitments on the blocks.
Share Purchase
As part of the agreement with NSE, ARC has agreed to subscribe for 8,333,333 new ordinary
shares in NSE with a total value of A$1.5 million. This will give ARC approximately 20% of
NSE. NSE will also have the right to raise up to a further A$1.0 million with outside parties on
the same terms as the ARC investment. On completion of the ARC purchase, ARC will have
the right to nominate one director to the NSE board. ARC will also have a right of first refusal
over future fund raisings undertaken by NSE.
Commenting on the acquisition, ARC Managing Director, Eric Streitberg, said:
“This transaction substantially completes ARC’s acreage acquisition program in the
greater Canning Basin. We have increased our holdings from some 75,000 square
kilometres to some 140,000 square kilometres and now hold an acreage position in the
Canning Basin that is twice the size of Tasmania! The NSE agreement gives us
access to the Kidson Sub-basin, the last major Sub-basin that we have identified as
being geologically prospective and having significant commercial potential. From what
data we have, the Kidson looks very prospective for oil but exploration is at an early
stage. We have designed the farmin program to systematically explore the Sub-basin
as we have done with the other Canning Sub-basins and it should give us the best
chance of making a discovery. We intend to commence work on the NSE acreage
next year through a substantial seismic acquisition program and then progress the
acreage from there.”
We are well underway with our three year Canning Basin exploration program with the
Fitzroy Trough Sub-basin program kicking off with the Valentine 1 well which has had
some very encouraging gas shows to date, and the 2007 seismic program anticipated
to commence next week.”
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