Senex and Origin Energy Agree Cooper Basin Gas Farm-out

Source Press Release
Company Senex Energy LimitedOrigin Energy Limited 
Tags Asset Deals, Deals, Tight Gas & Liquids, Shale Oil, Shale Gas, Upstream Activities
Date February 24, 2014

Senex Energy Limited (Senex, ASX: SXY) and  Origin Energy Limited (Origin, ASX: ORG) have agreed to evaluate tight gas sands in key areas of South Australia’s southern Cooper-Eromanga Basin involving a work program of up to $252 million.

KEY POINTS

  • Two farm-out agreements signed providing exposure to tight gas sand, shale and deep coal plays:

                     – Area A (36% of total areas of PEL 516 and PEL 115 (Senex 100%) and,

                     – Area B (47% of total area of PEL 514, Deeps only (Senex 80% and operator,  Planet Gas Limited (Planet, ASX: PGS) 20%)

  • Up to $252 million may be invested by the joint venture partners in a two-stage work program involving the drilling of at least 15 wells and substantial 2D and 3D seismic acquisition programs
  • Senex is free-carried for its share of the first $185 million of work program, with Senex, Origin and Planet having the option to contribute a further $67 million on a participating interest basis
  • Senex will retain operatorship of the permits during the two-stage work program, with Origin having the option to become operator following completion of Stage 2

FOCUSED ON COMMERCIALISATION

The parties have agreed a two-stage work program totalling $185 million with additional work program expenditure of up to $67 million, which is subject to operating committee approval. The first stage will evaluate the potential of the tight gas sands, provide exposure to shales and deep coal seams, and provide proof of concept. The second stage will evaluate the commerciality of the gas resource by undertaking extended flow testing through separate pilot programs. Senex Managing Director Ian Davies said Origin is the ideal partner to help commercialise the Cooper-Eromanga Basin’s significant unconventional gas potential. “Origin has built an unrivalled position in the eastern Australian gas market and has access to international markets through its APLNG export facilities in Gladstone. Origin is a natural partner for Senex to accelerate the commercialisation of a potentially massive gas resource, especially given its long-standing position in the South Australian Cooper Basin Joint Venture.

“These agreements cover 40% of the total area of PEL 514 and PEL 516, with Senex retaining its material interests to explore the remainder of these hydrocarbon rich permits,” he said.

TRANSACTION DETAILS

The following table summarises the transaction, which is conditional on certain approvals including registration of interests. Completion is expected by 30 June 2014.

  AREA A  AREA B  TOTAL 
Total petroleum exploration licence (PEL) areas 
 Farm-out areas
 
2,876 km2  (PEL 516 and PEL 115)1,031 km2 (255,000 acres) (36% of total PEL areas)  1,917 km2 (PEL 514) 904 km2(223,000 acres) (Deeps only, 47% of total PEL area)    
Stage 1 work program1    Participating interest earned  
 by Origin 
$65 million                            40%  $40 million                           30%  $105 million 
Stage 2 work program1    Participating interest earned  
 by Origin 
 $40 million                         10%   $40 million                         10%  $80 million 
Additional Area B work program                                            Stage 1 and 2 work program (equity basis)  N/A  $67 million  $67 million 
Total work program  $105 million   $147 million  $252 million 

AREA A – PEL 516 AND PEL 115

Area A comprises a 1,008 square kilometre portion of PEL 516 and a 23 square kilometre portion of PEL 115 in the southern South Australian Cooper Basin (refer Figure 1 and 3). This will allow operations to focus on the tight gas prospectivity of the Allunga, Skipton and Nappamerri troughs.

The Area A work programs will involve a 300 line kilometre 2D seismic survey, the drilling of up to eight exploration and appraisal wells, fracture stimulation and flow testing. The first well is expected to be drilled within 12 months.

 AREA B – PEL 514 (DEEPS ONLY)

Area B comprises a 904 square kilometre portion of the Permian system of PEL 514 (Deeps) in the Patchawarra Trough in the northern South Australian Cooper Basin (refer Figure 2, 3 and 4).

Senex retains its interests in the oil prone sequences above the Permian (Shallows), as shown in Figure 4. The Area B work programs will involve a 250 square kilometre 3D seismic survey, the drilling of up to seven exploration and appraisal wells, fracture stimulation and flow testing.

In Area B, the joint venture parties may elect to fund an additional work program, subject to operating committee approval, totalling $67 million. This will involve additional exploration and appraisal work during both stages.


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