Australia-based Beach Energy will farm into two adjoining permits in the Carnarvon Basin offshore Western Australia that contain the gas-condensate prospect Ironbark.
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| Ironbark map. Source: Cue |
Under the agreement, Beach will acquire 21% equity interest in the North West Shelf exploration permit WA-359-P from Cue Exploration, a wholly owned subsidiary of Australia’s Cue Energy Resources. In return, Beach will make a one-time payment to Cue of AUD$900,000 (US$681,297) for past costs, and future payments equating to 4% of Cue’s drilling costs for the Ironbark-1 exploration well.
Ironbark is located less than 50km from the North West Shelf LNG’s Rankin platform, and is nearby to Pluto and Wheatstone liquefied natural gas (LNG) infrastructure. Ironbark is a Mungaroo formation structural closure that covers approximately 400sq km, and is defined by high-quality 3D seismic data, Beach reported today (29 November). Cue’s internal technical assessment of Ironbank estimates the prospect to contain 15 Tcf of prospective recoverable gas resource.
The agreement between Beach and Cue is subject to BP exercising its option to acquire 42.5% equity interest in WA-359-P. BP has until 11 December 2017 to exercise the option, unless it is extended. The agreement also is subject to a joint venture and associated joint operating agreement being formed with full funding for the Ironbark-1 exploration well. Additionally, the permit holders will need to obtain an extension to the current permit expiry date of 25 April 2018 to allow “satisfactory timing” to plan and drill Ironbark-1. If these terms are met, Cue would hold 36.5% interest in WA-359.
For WA-409-P, Beach has acquired for nominal consideration a call option over a 7.5% equity interest in this block. If Beach exercises the option – which it can do so until 31 July 2019 - the company would make future payments equaling 7.5% of Cue’s cost to drill an exploration well in the permit. Beach also will pay Cue a 10% royalty on all future revenue earned by Beach from the permit. If the option is exercised, BP also would hold majority stake in WA-409-P of 80%. Cue would hold 12.5%.
Beach CEO Matt Kay said the farm-in and call option are part of the company’s plan to seek high impact exploration opportunities in Australia and New Zealand to grow its portfolio.
“With favorable Western Australia LNG market dynamics over the coming decade, successful development of Ironbark may align with expected shortfalls in LNG feedstock,” Kay added.
“Including the BP 42.5% option, Cue has now conditionally secured 75% of the funding for the Ironbark-1 well and retains long-term value from any success in WA-409-P through a revenue royalty,” said Cue CEO Matthew Boyall in a 29 November statement. As for WA-359-P, Boyall added that Cue continues to talk with companies interested in forming a joint venture with Beach and BP to share in the high-impact opportunity.
Cue expects to an exploration well to be drilled at WA-359-P in the first half of 2018. Half of the well's costs would be funded if BP exercises its option, Cue said.
Last month, BP received a further extension from Cue from 25 October to 11 December to decide whether to acquire the 42.5% stake in Ironbark. Ironbark is located next to the BP-operated WA-409-B permit; Cue said the location of this permit to the North Rankin platform and Pluto and Wheatstone LNG infrastructure would provide cost-effective commercialization options. According to Wood Mackenzie, the North West Shelf LNG plant and infrastructure will have spare capacity from 2021.
In December last year, BP completed its deal with Cue to acquire 80% interest in and operatorship of WA-409-P. Under that agreement, BP is expected to wholly fund the permit’s required work program over a three-year period. BP announced in October 2016 it would acquire 80% interest in WA-409-P and the option to acquire 42.5% interest WA-359-P.
Read more:
BP gains further Ironbark extension
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