Adelphi in turn acquired its stake from minnows Norwest Energy and Bounty Oil & Gas. Under the agreement, AWE will fund 15% of the costs of drilling the Magnolia-1 well in AC/P32 on the same terms as Adelphi’s farmin agreement with Norwest and Bounty.
These farmin terms include an overall cap based on a total gross well cost of US$8m. AWE’s farmin cost obligation is up to US$1.2m, with Adelphi’s remaining maximum farmin cost exposure reducing to US$1.8m. Any well costs in excess of the farmin cap will be funded by both companies in accordance with their respective interests in the joint venture.
AC/P32 is located in the Vulcan sub-basin off the coast of Western Australia, and is surrounded by existing oil and gas production and discoveries including Jabiru, Challis, Cassini, Skua, Swift and Montara. The Magnolia prospect is defined by 3D seismic and has the potential to hold 60 to 100 million barrels of recoverable oil, according to Adelphi.
The drilling of the Magnolia 1 well by the Ocean Bounty drilling rig is now scheduled for July/August 2005, said Adelphi executive chairman Alex Forcke.
“This transaction is particularly pleasing for us in that it has both introduced another highly respected Australian exploration company into the permit, and will also ensure Adelphi’s cost exposure to the Magnolia 1 well is appropriate to its resources,” Forcke said.
“Magnolia is a large, high-quality exploration prospect with a firm drilling schedule and an experienced operator and has attracted considerable attention from other potential farmin parties.”
Adelphi is designed to give Arc – its major shareholder – exposure to a high-risk, high-reward portfolio without compromising Arc’s ability to derive value from its existing portfolio of core Perth Basin assets.
Arc has said that Magnolia was the biggest target structure in the permitand if Magnolia was dry it would downgrade the prospectivity of the other targets. The well has about a 20% to 25% chance of success, according to Arc.
The farmin agreement is conditional on the completion of documentation and government and joint venture approvals. The date for satisfaction of these conditions is 31 July 2005.
Following the completion of farmins into this permit the joint venture will comprise:
AWE 10%, Adelphi 15%, Coogee Resources (Magnolia 1 operator) 20%, OPIC Australia Pty Ltd 25%, Norwest Energy NL (permit operator) 19.6% and Bounty Oil and Gas NL 10.4%.
