Assets included in the Heads of Agreement (HoA) include a 15.245% interest in EP 413, which contains the Jingemia Oil Field, a 32.5% interest in EP 368 and 100% of the share capital of AWE (Perth Basin) Pty Ltd, which holds a 33% interest in L11, including the Beharra Springs gas field, and a 33% interest in the adjoining EP 320 exploration permit.
AWE will sell its onshore Perth Basin interests to ARC for a cash consideration of $15,750,000.
ARC has made a name for itself by combining with Origin Energy in the Perth Basin in the development of the Hovea and Eremia fields which have a combined total reserve of over between 15-20 million barrels. It also had a stake in the Cliff Head Oil discovery but has subsequently sold it.
The company recently completed the Hovea 10 injection well and is currently producing 6,000bbls per day from the field.
Recently ARC has been forced to on-sell gas from Beharra Springs in order to maintain profitable supply contracts in Perth. The company will now be able to increase its margins appreciatively by maintaining its own supply, thereby increasing its cash flow as the development phase of Eremia continues.
Independent analyst Peter Strachan said the rationalisation deal seemed perfect for both buyer and seller. "ARC with its knowledge of the onshore Perth Basin has the potential to crank up its program and can sell all the gas it produces from Beharra Springs, while AWE has bigger fish to fry in the Otway and Taranaki," he said.
"This acquisition is a major step forward in ARC's strategy of consolidating its strategic position in the Perth Basin. With this purchase, ARC becomes the dominant acreage holder and operator in the onshore Perth basin. It will allow us to take a portfolio view of exploration with up to eight exploration wells planned during the first half of 2004. It also gives us access to more of the oil and gas "sweet spot" of the Basin and the ability to leverage off our current operating expertise and facilities," said ARC managing director Eric Streitberg.
"To fund the acquisition and provide capital for further expansion, ARC is undertaking a placement of 21.9 million ordinary shares at an issue price of $0.85 per share to raise approximately $18.6 million."
"We have had a very good year so far and this acquisition is a nice Christmas present for us," said Streitberg.
AWE has had recent success in the Otway Basin with the large Casino gas field which has secured a foundation contract with TXU as well as being awarded New Zealand's first deepwater Taranaki exploration permit.
The partners in the Casino field (AWE 25%) have proven a gross gas column of approximately 290m over the three wells and will supply TXU with a total of 293 petajoules (PJ) of gas with an option to purchase, or an obligation to process, an additional 200PJ, resulting in a contract quantity of up to 493PJ of gas. Gas supply will commence in 2006 and extend through to 2017.
New Zealand Associate Energy Minster Harry Duynhoven awarded offshore Taranaki licence PEP 38483 last Tuesday to a consortium involving AWE New Zealand (75%), Stewart Petroleum (15%) and WM Petroleum (10%).
The companies are planning more seismic during 2004-05 and at least one exploratory well before 2007.
"The sale of AWE's onshore Perth Basin assets is being driven by the recent success and progress of our key offshore appraisal and development interests in the Perth (Cliff Head), Bass (Yolla), Taranaki (Tui) and Otway (Casino) basins," said AWE's managing director Bruce Phillips.
"As the company builds, we will be adding substantial capital and time to these large offshore projects, and as a consequence, the "bread and butter" interests such as the onshore Perth Basin, which have been invaluable to the company in the past, have now become non-core.
ARC shares are currently in a trading halt.
