Santos conditionally exercises option on Beehive-1
In a promising development for Melbana Energy Limited (ASX:MAY), Santos Limited (ASX:STO) has validly and conditionally exercised its option to acquire an 80% interest in the Permit containing the Beehive prospect.
The parties agree that upon the satisfaction of the conditions Melbana will transfer an 80% interest in the permit in return for the transferee(s) funding 100% of the cost of the Beehive-1 well.
Santos is in active discussions with several parties with respect to participation in the Beehive-1 exploration well and these discussions are ongoing.
As such, it has been agreed that Santos is not required to submit an application for the transfer of an interest in the permit until it has successfully concluded a farm out for some of its right to acquire that interest.
Santos working on rig availability
Santos has also indicated that the work it has done on identifying rig availability suggests the drilling of the Beehive-1 exploration well would possibly not occur prior to the end of the current permit year (December 2020).
As such, an application for an extension to the current permit year should be made subsequent to Santos successfully farming out some of its participating interest in the permit.
Melbana has agreed to allow Santos until March 4, 2020 to complete a farm-down of its right to acquire an 80% interest in the permit.
If the farm-down is successful, the parties would then collaborate to secure the necessary extension to the current Permit year to align the drilling of the Beehive-1 well with rig availability.
Should Santos be unable to conclude a farm-down by March 4, 2020, or if it is not possible to subsequently extend the permit year, the exercise of the option will not become unconditional and will expire and Melbana would retain a 100% interest in the permit.
Santos agrees to fund environmental permit
In consideration for Melbana affording Santos more time to conclude a farmdown, Santos agrees to complete at its expense an application for an environmental permit (EP) for the drilling of the Beehive-1 exploration well.
This commitment by Santos to produce an EP, along with its identification of a firm rig slot for drilling the well, should assist with the application for any extension request to the current Permit year.
Melbana would remain free carried for its 20% interest in this exploration well should the above conditions be satisfied and the option exercise becomes unconditional.
Targeting upper end prospective resource of 1.6 billion BOE
Underlining the potential transformational impact that Santos’ involvement would have should the prospective resource be proven, Melbana chairman Andrew Purcell said, “Santos' decision to farm-down its large equity interest in Beehive is entirely consistent with its recently stated strategy of optimising its portfolio through acquisitions, disposals and farm-outs, particularly in northern Australia where it is working to reduce its equity in the Barossa Field and Darwin LNG to 50% or less.
‘’We’re pleased to continue to work co-operatively with Santos given the commitment they’ve shown to Beehive - a prospect with 388 million barrels of oil equivalent (BOE) of prospective resource (best estimate) and potentially 1.6 billion BOE of prospective resource (high estimate) which, if proven, would prove transformative for each of our companies and for northern Australia.
‘’This variation to our agreement with Santos takes us a critical step closer to drilling the largest undrilled structure in Australia.”