Strike Oil will earn a 37.5% working interest in the project, while private Houston-based company, Lynn Properties, has also agreed to participate in the acquisition. Comet Ridge will act as operator, also with a 37.5% working interest.

Comet said it intends to workover the producing well, Grassy Creek 1-36, which is currently flowing about 2 barrels of oil per day, to improve current production and evaluate the potential for additional drilling.

The well, which has produced almost 70,000 bbl of oil since the early 1970s, is located in the north-west corner of the lease. It is immediately offset by two wells in neighbouring leases that have collectively produced nearly 900,000 bbl.

The well and the lease both lie in the 5047 acre Coal View Federal Exploration Unit, for which the company is in the process of gaining regulatory approval.

“Formation of a FEU combines all the separate leases with different ownership under one operating agreement,” Comet managing director Andrew Lydyard said.

“This allows for the systematic and orderly development of the field. It will also preserve some of the leases that have shorter-term expiry dates.”

In late March, the company announced plans to spend $US1 million (A$1.3 million) to buy a 420,000 acre lease area that covers the “very lightly explored” Grays Harbor Basin in Washington state.