New Guinea Energy (ASX: NGE) has signed a deal with an (undisclosed) multi-national oil company to fund seismic programs and up to three wells in NGE's Papua New Guinea license permits.
A definitive farm-in agreement is expected by end of August 2009. NGE sought a farm-in partner and funding proposal in 2008.
Clearly, this deal would enable financial impost to be reduced and risk to be spread by NGE for these PNG oil assets.
Interestingly, a number of significant oil and gas discoveries have been made in proximity to NGE's PPL license permits in PNG.
Under the agreement, NGE would be reimbursed for a substantial part of historical costs under the two permits: PPL 268 and PPL 269. The agreed seismic program over PPL 268 and three well costs (on PPL 268) of up to US$15 million would be mainly borne by the partner. An interest of 15% would be assigned to the farmee, with an option to move to 70% interest in PPL 268.
In PPL 269, the same terms as PPL 268, except the farmee would be assigned a 50% interest at the outset for funding seismic and funding a well up to $15 million. With an option to gain an additional 20% interest if another well is drilled.
Executive Chairman Michael Arnett said "we are delighted to have reached this agreement with a partner whom we believe is well suited to meet the financial, technical and commercial challenges of developing these assets in PNG.”
Arnett said “this agreement represents a strong endorsement of the potential of our PNG licences and successfully completes the enormous efforts over the last two years.”