The formal agreements define the terms of a conditional memorandum of understanding signed by the two companies on May 31 last year.
“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 program for 2008,” Central said.
The work program includes drilling four conventional wells and three coal seam methane wells and acquiring an 1150km Northern Territory 2D seismic survey and a 30,000 square kilometre gravity survey over SPA 7/04-5 in Western Australia. The seismic program has already begun. Additional drilling options for a further three conventional wells have been agreed.
Under the agreement, PXA will fund 40% of pre-drilling seismic acquisition, up to a limit of $A3 million per permit, and 40% of the cost of drilling up to three exploration wells in each of Central’s permits. Central currently has nine granted permits and 18 permits under applications.
“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,” Central said.
According to the company, these prospects could jointly host up to 260 million barrels of oil in place and up to 4.9 trillion cubic feet of gas and 185 billion cubic feet of helium.
Three CSM wells are also planned as firm commitments targeting the initial exploration phase for 34-70Tcf in CSM recoverable prospective resources assessed independently last year in the Pedirka Basin.
The exploration package spans an area of about 250,000sq.km in four 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 said.
“Central’s push for control of the petroleum potential of central Australia began in 1998 when oil was trading at $US12 a barrel and there was little interest by other companies in these vast tracts of prospective ground.”
PXA can retain a 20% participating interest in each of the prospects drilled and their corresponding permits.
If PXA ceases expenditure before the completion of the full exploration program in any permit, it will retain a 20% interest in any producing field where it has contributed to the discovery well, provided it is compliant at the time with any seismic program approved by the joint venture operating committee.
Subject to the compliance with seismic programs, PXA can also retain an incremental interest of 6.66% 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 about $130 million to the drilling of up to 81 exploration wells based on conventional targets,” Central said.
The partners have agreed to “deem” the expenditure of $2 million increments of CSM 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.
PXA is a start-up oil junior founded by Sydney-based resources financier Barry Dawes, managing director of stockbroking firm Martin Place Securities. Dawes is also the co-founder of He Nuclear with Sydney-based lawyer Ian Mutton.
