Mosman will pay $US975,0000 ($A1.27 million) for the Pine Mills field in a deal to be completed by the end of the year.

Cue's new board and management decided in June that entry into Pine Mills just 12 months earlier was a mistake.

It flagged a reduction in its asset mix to focus on production and near-term assets in New Zealand and Indonesia, and exploration around the Ironbark prospect on the North West Shelf.

Mosman will pick up and operated 80% working interest in the field, assuming the other Pine Mills partners don't exercise their pre-emption rights.

It will gain title over the 2200 acre field, 12 acres of freehold land, an associated 100%-owned workover rig, 373,000 barrels of 1P reserves and 2P reserves of 477,000bbl.

Cue entered Pine Mills in June 2015.

The field, about 160km east of Dallas, was producing around 90 barrels of oil per day, and Cue paid $2 million for its stake to Toronto-based Gale Force Petroleum with the aim of diversifying its portfolio.

It was to be the first step of acquiring producing assets in lower cost environments with proven prospectivity.

In addition to the cash payment, Cue agreed to carry Gale Force through $1 million of expenditure over four years. A share of the field is owned by Hammerhead Managing Partners, which is in dispute with Gale Force, although Cue and Mosman have been indemnified.

The Pine Mills field includes 15 producing conventional vertical wells, two water injection wells and a further 10 inactive wells along the Woodbine trend, four of which can be worked over.

Cue managing director Grant Worner said the junior had been successful in cutting 40% from its overheads over the past six months by exiting its New Zealand exploration licences, extending gas production and field life in Indonesia, farming-out a licence to BP in WA.

"The Pine Mills sale continues the implementation of our corporate strategy as it improves Cue's profitability whilst also simplifying our operations and geographic footprint," he said.

"The company is now in a better position to focus on extracting value from its most valuable assets whilst maintaining financial discipline and operating within its means."

Mosman, which had previously been exploring a move into diamonds, will pay for the Pine Mills acquisition from available cash, and will still have cash and investments of $2 million remaining.

Since being discovered in the 1950s Pine Mills has produced some 12MMbbl, and is now producing around 100bopd, or a net 62bopd to Cue's 80% share.

The investment was not a happy one for Cue, which lost $A1.7 million for the year to June for its US investment and is now set to take a haircut on the sale.

Mosman believes it can continue with the workover and refurbishment program started by Cue, and can eventually fund upgrades from cashflow.

It expects to spend less than $500,000 over the first few months to increase production.

Mosman said there is the potential to increase production rates from the Sub-Clarksville and Woodbine sands in the near term, and suggested that in the longer term there is the potential to examine the Eagle Ford Shale and Paluxy sandstone horizons.

Mosman chairman John Barr said, as Cue had when it entered Texas, that there are opportunities to acquire similar assets that would offer operating synergies.

"The Pine Mills producing oil field enables us to deliver on our stated objective of generating sustainable cash flows as well as offering near-term development upside potential," Barr said.

"Since early 2016, the board's focus has been to identify opportunities that would provide cash flow and have development upside; whilst exploration work continues on existing permits within restricted expenditure constraints.

"The acquisition is the result of months of work where a number of production projects were examined. This search has been undertaken to balance the existing exploration portfolio which has significant prospective resources by acquiring a production asset with reserves, existing cash flow and near-term development upside potential.

"Our strategy in the near term is to focus on increasing production and capturing the upside we see in the Pine Mills oil field."

Abandonment costs are estimated at $460,000, and Cue will need to spend $50,000 to replace an abandonment bond.

Cue's other areas of interest are frontier blocks in New Zealand and Australia's Northern Territory.