British oil giant BP is set to become the operator of a joint venture in Australia where it will manage the drilling of a 15 TCF offshore gas prospect – the Ironbark.
This is according to Cue Energy, which currently holds a 100 percent stake in the block containing the prospec, but has agreed farm-down deals with BP, Beach Energy and New Zealand Oil & Gas.
Cue on Friday said it had executed an agreement with BP, Beach Energy, and New Zealand Oil & Gas to form a joint venture to drill the Ironbark-1 exploration well in WA-359-P.
In a separate release on Friday, Cue announced the execution of an agreement for New Zealand Oil & Gas, to acquire 15% equity in WA-359-P.
The Co-ordination Agreement sets out the activities that Cue, BP, Beach and New Zealand Oil and Gas have agreed to fund and undertake and will allow BP to start work on the Ironbark-1 exploration well prior to the official title transfers and creation of a formal joint venture. Title transfer and joint venture formation are targeted during Q2 2019, once certain conditions, including regulatory approvals, are received.
Until this time, Cue will retain 100% equity in WA-359-P and BP will act as operator on behalf of Cue in relation to planning for the Ironbark-1 well.
The coordination Agreement is conditional on, amongst other things, Cue receiving shareholder approval for the NZOG Farm-In and regulatory approval of a Suspension & Extension to WA-359-P and the commitment well drilling deadline.
After the satisfaction of the conditions precedent under the Coordination Agreement, BP will formally assume the role of operator of WA-359-P and the participating interests in permit will be: BP (operator) 42.5% Cue 21.5% Beach Energy 21% New Zealand Oil & Gas 15%
BP, Beach and New Zealand Oil & Gas will collectively fund US$11.3m of Cue’s share of the Ironbark-1 exploration well costs. Cue will fund its remaining share of the well cost from its current cash reserves, which will be escrowed as required under the Coordination Agreement.
Cue CEO Matthew Boyall commented on the execution of the agreement: “This is a great outcome for Cue. This agreement sets out a pathway for Cue, BP, Beach and New Zealand Oil & Gas to immediately commence detailed well-planning work and form a fully funded joint venture to drill the Ironbark-1 exploration well. BP are an experienced operator and have the technical capability to drill the Ironbark-1 well. Cue estimates the Ironbark prospect contains 15Tcf of prospective recoverable gas(2) at a 25% chance of success. Retention of 21.5% equity provides a company changing opportunity for Cue if the well is successful.”