In a statement yesterday, Icon said Santos has agreed to buy its 27.5% stake in two Queensland permits, ATP 765P and 766P, for $4.5 million.

These funds would be used to allow Icon to drill the Stitch-1 well, as well as provide additional working capital for exploration.

Under an earlier farm-in agreement, Santos assumed operatorship of Icon’s ATP 626P permit where it agreed to spud the Stitch-1 well in April last year.

This was pushed back to August due to problems obtaining environmental approval. But by then the drilling rig slot had been taken.

Santos then advised that the earliest time for drilling Stitch was January, but this lapsed after it withdrew from the farm-in agreement.

As a result, Icon was reinstated as operator of ATP 626P, where it is currently trying to organise a rig for drilling the well.

Earlier this week Icon held its annual general meeting, where chairman Martin Pyecroft blamed the hold-ups for a recent drop in his company’s share price.

“Drilling activity has been delayed through new government regulations and shortages of drilling equipment,” he said.

“Some of these problems are being solved slowly and it is anticipated that drilling should commence in the second half of 2007.”

Stitch-1 is on the Moonie Fault, about 40km south of the Moonie oil field with the same reservoir objective.