AWE is also taking a bigger stake in the Hector South sub-block in an adjoining licence.
Sydney-headquartered AWE told the ASX this morning that it was acquiring a further 22.5% interest in PMP38158 (which includes the Tui fields) and the Hector South sub-block (HSSB) of PEP38483 from Transworld subsidiary New Zealand Overseas Petroleum (NZOP).
AWE is to acquire 100% of the shares in NZOP from Transworld for a consideration of 48.66 million fully paid ordinary shares (representing approximately 11% of AWE’s expanded capital), plus a minor share of the potential upside from the Tui Area project and the HSSB, effective from October 31.
NZOP, which will become a wholly owned AWE subsidiary, will remain Tui operator.
In addition, AWE is to pay an unspecified net cash interest to Transworld if returns from PMP38158 exceed certain benchmark levels. AWE will also pay an over-riding royalty interest on any revenue resulting from the development of any future discoveries within the HSSB.
AWE said these arrangements were subject to Transworld selling its last 22.5% interest in PMP 38158 and the HSSB to an un-named third party, which industry analysts say is Tui and HSSB partner Mitsui, for a comparable sum.
Analysts also say these arrangements diversify Transworld’s Australasian EP portfolio through it taking a stake in AWE and its many projects, rather than just the Tui fields.
AWE said that following completion of these transactions it would hold a 42.5% stake in PMP 38158 and the HSSB.
The US$204 million Tui project will be AWE’s first major development operational role and its additional Tui equity will require extra development expenditure of approximately US$46 million - funded largely by NZOP’s expected US$41.4 million cash reseves and AWE contributing a small amount from existing cash resources.
AWE managing director Bruce Phillips said the arrangements would materially increase exploration acreage in one of AWE’s cornerstone asset areas.
It would also provide for further cashflow growth in a known project with upside potential; increase proven and probable oil reserves at an attractive price; give AWE more control over the Tui Area project; and provide a “soft” entry into a significant operatorship role.
Phillips said AWE would be inviting Transworld principal John Deuss to join its board. He anticipated the current Tui development management team in Houston and New Zealand would continue.
“This continuity will provide added certainty to the delivery of the project on the current timetable. Additionally, all of the existing Tui project contracts will not be adversely impacted by these transactions.
“The acquisition of an additional interest in the Tui Area oil project is a significant step forward in AWE’s evolution as an oil and gas producer.
“This transaction strengthens our acreage position in the area and will make AWE the pre-eminent operator in the Western Taranaki, operating joint ventures on behalf of international participants such as Shell, Mitsui and OMV.”
