Armour Energy (ASX:AJQ) has attracted a US$100 million (A$135.9 million) farm-in agreement from American Energy Partners (AEP) over its unconventional oil and gas acreage in the McArthur Basin, Northern Territory.
Interestingly, AEP founder Aubrey McClendon was the co-founder and chief executive officer of Chesapeake Energy Corporation (NYSE:CHK) – now a US$5.16 billion market cap - from 1989 until 2013.
During this period, Chesapeake grew from a start-up to the second largest producer of natural gas and the 11th largest oil producer in the U.S.
Under the non-binding letter of intent, the funds will be spent on work programs over a maximum of 5 years in exchange for a 75% working interest.
In addition, Armour will be free carried during Phase One of the farm-in and receive an upfront payment of US$11 million.
It will also be provided access to US$100 million of debt funding for its share of Phase Two appraisal and development costs.
The company will receive a bonus payment of US$7 million on grant of one million acres of production licences, or grant and transfer of interests in pending tenements to AEP.
The agreement covers 21.5 million acres of its 34 million acre land holding in the McArthur Basin.
Armour will retain 100% ownership of the southern two tenements covering 7.8 million acres over overlapping Georgina and Southern McArthur Basin tenements, and all of its tenements in northwest Queensland covering 5.1 million acres.
The company had $8.5 million in cash as at 30th June 2015.
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