The Perth-based company told the market on Tuesday night that the acquisition would substantially increase its petroleum production and reserves, and make Arc one of Australia’s leading listed oil and gas companies.
The takeover will see Arc’s net proved and probable (2P) reserves leap 336% to 29.1 million barrels of oil equivalent, while net 2008 production is forecast to jump 125% to 4.2MMboe.
Together with associated exploration acreage, the assets include a 40% interest in the producing Wandoo oil field, offshore Carnarvon Basin; a 24% stake in the Cliff Head oil field, offshore Perth Basin, and nearby acreage, including the recent Frankland discovery; and 12.5% of the BassGas project and associated acreage, including the producing Yolla gas and condensate field, including the White Ibis, Trefoil and Aroo discoveries.
Arc managing director Eric Streitberg said all three fields were operated by credible, proven operators and the acquisition would give his company a greater geographic diversity of liquids-rich reserves and production.
“Arc’s search for assets has reinforced to us that Australia is one of the most stable and commercially attractive places to operate in the world,” he said.
“We believe that there is significant upside potential in the permits that we have acquired and look forward to working with our new joint venture partners and the field operators to capitalise on these opportunities.”
However, Australian Worldwide Exploration managing director Bruce Phillips – whose company is a partner in both BassGas and Cliff Head – told journalists at last week’s APPEA Conference in Adelaide that the Wandoo assets were up for sale but AWE was not interested in buying.
“We see Cliff Head as being the weakest of our cornerstone assets,” Phillips said. “It has only ‘fair’ growth potential.”
But with Arc owning the Dongara gas plant, only 20km from the recent Frankland gas discovery, the company is now in a good position to benefit from any further oil or gas discoveries in the offshore Perth Basin via either Cliff head or Dongara.
Already a Cliff Head partner, the acquisition will increase Arc’s exposure from 6% to 30%.
The BassGas Project is a long-life gas and condensate production asset with secure long-term gas sales contracts into the east coast gas market.
The project is now achieving consistent throughput and reliable gas production.
There are a number of opportunities for increased production from the development of the White Ibis, Trefoil and Aroo discoveries.
The Wandoo oil field is a well-understood, long-life oil field that Arc said generated considerable cash flow with good exploration potential in the surrounding area.
However, this part of the package is subject to pre-emption. The other joint venture partner in the Wandoo field, Canada’s Vermilion Oil & Gas can exercise its pre-emptive right and buy the asset.
“We are talking to Vermilion now,” Streitberg said.
“We hope to get an early resolution as to whether or not they intend to pre-empt.
“If they exercise the right and purchase the asset, it will take about a third of the deal out. Although we would be very disappointed if that happened, it would make our funding job easier.”
Arc has arranged nine-month bridging finance with BOS International, which it will repay through a term debt facility and an equity raising.
It is understood that Arc is now considering buying Chevron’s Thevenard oil assets.
Less than two years ago, the company was purely an onshore Perth Basin explorer and producer.
It now has offshore Perth Basin, Victorian and Yemeni assets, as well as operatorship of most of the onshore Canning Basin, and it seems likely to soon have offshore Carnarvon Basin oil assets.
In addition, Arc recently joined an Africa-focused asset acquisition alliance.
However, Streitberg said despite this significant diversification, Arc was still firmly committed to its Perth and Canning basin exploration and development strategies and he believed the broader portfolio would give Arc more options in funding its Canning Basin exploration push.
