Perth-based partners AuDAX Resources and Eagle Bay Resources have reached agreement with White Sands to drill the first five wells in PEL 182.
Drilling is expected to start in the second quarter of this year.
PEL 182 is located about 70km north of Moomba, close to existing pipelines. It surrounds several Santos production leases and is close to a number of oil fields, including Tirrawirra, Moorari and Fly Lake/Brolga.
In November AuDAX agreed to earn 49.9% in PEL 182 from Eagle Bay by drilling the first three holes capped at $4.5m.
But a shortage of rigs capable of drilling the required wells within the required time has
prompted the parties to make "a unique arrangement to ensure all drilling commitments can be met", AuDAX said in a statement.
AuDAX has advanced US$1m to White Sands for the purchase and mobilisation of a state-of-the-art EDM drill rig that can drill the required wells to a depth of 2,700 – 3,200m.
In return, White Sands will ensure the first priority on five drill slots immediately following a shake-down period and confirmation of the rig’s capabilities and suitability for the drilling of the proposed wells on the permit.
AuDAX will also receive US$250,000 credit on each well equating to a return of US$1,250,000.
White Sands will also earn a 10% equity in the permit from AuDAX by contributing 20% of the cost of each of the five wells.
AuDAX has also agreed to grant Bounty Oil & Gas NL - which owns 15% of White Sands - an option to pay 10% of the five well turnkey authority for expenditure costs to earn 5% equity in each of the wells. If Bounty exercises this option, upon completion it will be deemed to have earned a 5% stake in the whole of the permit.
On an estimated A$1.5m per well, the White Sands arrangement will reduce AuDAX’s commitment by A$1.1m over the 3 holes required to earn its interest and by total of A$1.83m over the five-well first-year program, the company said.
If Bounty exercises its option it will reduce AuDAX’s commitment by another $450,000 over the first three holes and $750,000 over the five-well program.
At the completion of the five-well programme, AuDAX will hold a 34.9% participating interest in the whole permit for a total contribution of A$3,417,000.
AuDAX is a gold explorer making its first foray into the energy sector. After years of frustration it has given up on its disappointing Bronzewing South goldfield project in the West Australian Goldfields, but it is still committed to searching for gold elsewhere.
In November AuDAX managing director Gary Roper told EnergyReview.net that the company was "new to the game but not naïve."
"We've used independent consultants who were very positive about the block and we'll continue to use independent consultants to keep us on the straight and narrow," he said.
Current intersts in PEL 182 are Eagle Bay Resources 50.1% and AuDAX 49.9%.
