Mosman Oil and Gas Ltd (AIM:MSMN) has agreed a deal to monetise its stake in the Billy Goat helium project, part of the Vecta venture, in Colorado.
A deal with Desert Eagle Operating LLC sees Mosman sell its stake in Billy Goat, in exchange for a 5% royalty over the project’s future revenues. It means Mosman will earn tied to on Billy Goat’s performance, without any further outlay on the project.
Mosman still owns 20% of the four other Vecta project areas - The Bard, Garcia, Treasure Hill and Mona Loa – and drilling is slated to get underway at The Bard next week (2 June).
"This arrangement with Desert Eagle is the best way for Mosman to commercialise our interest in the Billy Goat asset,” Mosman chief executive Andy Carroll said in a statement.
Desert Eagle is acquiring a 92% stake in the Billy Goat project, whilst Mosman’s partner Vecta Oil and Gas retains an 8% interest in the asset.
If Desert Eagle does not start the permitting process for one or more wells within six months, the project returns to Vecta and Mosman (as 70% and 30% respectively).
“Desert Eagle and associated companies are the leading helium drilling, development, production and marketing group in this area of Colorado with a proven track record of delivery,” Andy Carroll said.
"The 5% overriding royalty interest provides the opportunity for Mosman to share in revenues from the Billy Goat AMI lease without capital investment in drilling and development, and without ongoing production operating costs.”
Carroll highlighted that Mosman will now be able to allocate capital to explore other opportunities, drill other wells, and support the development of its Sagebrush asset.