The buyer, willing to try to re-establish gas-condensate production from the Sorochynska-201 and 202 wells, will take ownership of Hawkley's 11 million cubic feet per day gas plant, compression and pipeline, installed at a cost of $2.25 million by Hawkley in 2013.
Cyprus-based Tomeas Assets has been named as the buyer, and was described as already being familiar with the situation in the politically fraught Ukraine, a nation subject to Russian aggression and civil unrest in the east.
Tomeas has paid a deposit of $100,000 to Hawkley, with the remaining US$900,000 to be paid at completion of the sales process.
The sale is subject to several conditions, including forgiveness of intercompany loans, obtaining any necessary regulatory approvals and the approval of Hawkley shareholders for the disposal of the company's main undertaking.
Hawkley was one of the first ASX oilers to enter the Ukraine in 2007, and it is basically the last company standing, as every other junior oiler heading into the former Soviet sphere has fled, some with their shirts still intact.
It picked up the Sorychynska and Chernetska licences in 2007 and successfully made the Sorochynska-201 discovery in 2010.
Between February 2011 until it ceased in December 2014 cumulative production from Sorochynska-201 was 5.63 billion cubic feet of gas and 172,887 barrels of condensate, and while Well-202 offered promise, it failed to produce after being hooked up to the plant and a workover was never completed.
Sorochynska-201 suffered a water influx in November 2014 and efforts to resume production, including installation of additional compression equipment, were unsuccessful.
The company was also hit by a 55% increase in royalties on production from August 2014 and a devaluing of the currency in response to the crisis in Ukraine and the annexation of Crimea by Russia, factors that meant Hawkley was unable to secure much in the way of additional investment support
A move into Myanmar in order to diversify was also unsuccessful, as was a sale of the Ukraine project to ASX-listed Black Star Petroleum for 600 million shares, then worth about $1.2 million.
"It is disappointing that the sale of the Ukraine operations has been necessary after working in the country since 2006 and achieving success with the first well drilled, Sorochynska-201," chairman Glenn Featherby commented.
"Unfortunately the follow up Well-202 did not achieve commercial gas flow despite extreme confidence by the technical team of a successful outcome. This was followed by a substantial increase in royalty rates which reduced net cash flow significantly.
"The premature shutdown of Well-201 in 2014 combined with capital outflow restrictions, political instability, conflict with Russia and complete negative investment sentiment in Ukraine resulted in a perfect storm of events which led to a significant erosion of market capitalisation, a fate shared by all other oil and gas companies operating in Ukraine."
He said the sale will allow the company to meet its liabilities and provide a surplus cash position and the opportunity to seek a new direction, possibly outside the oil patch.
Hawkley had $131,000 at the end of the last quarter.
