Buru Energy (ASX:BRU) has reached an agreement with Quadrant Energy Australia in relation to the Coastal Titles Farmin Agreement that was originally executed on 1st November 2013.
Quadrant will withdraw from the Coastal Permits (EP 390, 438, 471 and 473) by paying the Buru and Mitsubishi joint venture a gross sum of $10 million ($4.9 million net to Buru).
Earlier this year, Quadrant, a consortium of Brookfield Asset Management (NYSE:BAM) and Macquarie Capital (ASX:MQG), acquired the Australian assets of Apache Corporation (NYSE:APA).
The terms of the original farmin agreement included a commitment by Quadrant (then Apache) to fund a $25 million exploration program.
Through the farmin, Quadrant earned a 50% interest in the Coastal Permits while Buru Energy and Mitsubishi each then held a 25% equity interest.
The Coastal Permits are located primarily on the geological feature known as the Broome Platform with the Goldwyer Shale petroleum system being the principal exploration objective.
Neither the Ungani trend nor the Laurel Formation tight gas accumulation is present on these permits.
Subsequent to the Quadrant farmin, the joint venture drilled the Commodore 1 and Olympic 1 conventional oil exploration wells targeting Ordovician aged reservoirs sourced by the Goldwyer Shale.
Although some hydrocarbon shows were encountered, the wells were non-commercial and were plugged and abandoned. The cost of these wells and other activities on the permits was substantially less than the $25 million farm-in commitment by Quadrant.
Eric Streitberg, Buru’s executive chairman, commented:
“This is an appropriate resolution to the Coastal Titles Farmin Agreement. The original deal was struck in a very different oil price and operating environment, and we are very pleased that the parties have come to a mutually agreeable commercial resolution.
“The payment from Quadrant is a welcome cash injection for Buru Energy which will be used to fund further exploration or appraisal and development programs on our core areas.
“Our relationship with Quadrant will also continue in the context of our mutual interest and involvement in Western Australian energy supply.”
As at 30th June 2015, Buru had $41.9 million in cash.
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