Empire's hand was tipped after Armour Energy yesterday went public with its own $US100 million ($137.09 million) farm-in deal with AEP.
When questioned yesterday by Energy News, Empire executive chairman Bruce McLeod would neither confirm nor deny suggestions AEP was the partner not named in Empire's recent filings.
Nor would McLeod comment on whether Armour's deal would play any role in setting the value Empire's then-private discussions with AEP.
The Oklahoma-based AEP has signed a non-binding letter of intent for a $US75 million farm-in for all of Empire's petroleum tenements covering 14.6 million net acres of the McArthur Basin.
That is less than what Armour has been offered for its 21.5 million acres, on terms that do not appear to be as generous, but which represents one of the most significant deals in Empire's decade in the oil patch.
AEP will earn an 80% operated interest across both farm-ins.
It will pay Empire $US60 million over a three year period to earn an 80% operated interest, and will also pay $7.5million upfront for past work and could pay a further $7.5 million in cash payments subject to a series of benchmarks being achieved.
The farm-in is expected to require expenditure of $US15 over the first two years.
As with Armour, Empire can take back the operatorship if AEP does not secure at least a 50% interest.
Once the deal is finalised AEP will also be issued shares in Empire giving it options representing 7.5% of the company, valued at $0.125 per share, several multiples of today's share price of around 2c, expiring five years after the date of issue.
"The ability to attract one of the world's most experienced unconventional oil and gas development teams to Australia demonstrates the potential of the McArthur Basin," Empire's McLeod said.
If both deals are concluded AEP will control around a 147,000sq.km over the entire McArthur
Basin Trough, which Empire believes is the major source of hydrocarbons within the McArthur Basin, along with extensive Tawallah Shale and Velkerri Shale formations and the shallower Barney Creek formation.