In other news, Great Artesian and joint venture partner Enterprise Energy have successfully concluded negotiations for the sale of gas from its Smegsy-1 gas discovery. Great Artesian said details would be announced within the next couple of weeks once all the parties had signed off on the agreement.
Under the new farmin agreement, Magellan will fund all of Great Artesian’s share of the drilling costs at a minimum of two, and up to a maximum of five, exploration wells within PELs 106 and 107.
Magellan has agreed to fund Great Artesian’s 60% share of drilling costs for the Kiana-1 and Tyringa-1 wells to earn a 30% interest in any subsequent production licence if drilling results in a commercial discovery.
The wells will be operated by Beach Petroleum Limited, which is earning a 40% interest in any production. Drilling of Kiana-1 will begin on August 8 or 9, according to Great Artesian.
The agreement also provides for Magellan to earn additional interests if it chooses. By funding 60% of the cost of a further three exploration wells, Magellan will earn a similar 30% interest in any production licences following commercial discovery, together with a 20% participating interest in either PEL 107 or PEL106, depending upon the permit in which that additional drilling occurs.
The farmout is part of Great Artesian’s strategy to reduce interests in its exploration activities to levels more in keeping with industry norms, Great Artesian chairman Norm Zillman said.
“The expenditure savings that the farmin brings, coupled with our recent successful $7 million capital raising, will allow Great Artesian to benefit through involvement in new business opportunities.
“Following farmin agreements with Beach, Enterprise Energy NL and Rawson Resources Limited, the Magellan farmin again endorses the high regard that our peers hold of our South Australian Cooper Basin permits.”
Great Artesian also recently made a farmin agreement with Rawson Resources Limited. Subject to Rawson undertaking a successful capital raising and listing on the ASX, the new company is to fully fund Great Artesian’s share of a well in PEL 107 and in ATP 552 located in the Surat Basin.
Great Artesian has also entered into an in-principle agreement with Blue Energy Limited involving that company farming into portions of PEL 106 on a discovery basis, again subject to successful capital raising.
Great Artesian has also finally sealed the long-awaited farmin deal for offshore Otway basin permit, EPP 27, with Oilex.
“Conclusion of our farmin and joint operating agreement has taken longer than expected, primarily because of a change in that company’s CEO,” Zillman said.
“Nevertheless, Oilex remains committed to funding the drilling of a well within the permit prior to the anniversary date. It will shortly deposit US$1.5 million into a trust fund for the purposes of contracting a suitable drilling vessel to undertake this work.
“At this stage, and with the world-wide shortage of such vessels, we do not anticipate drilling to commence until early-2006.”
