New Guinea Energy (ASX: NGE; OTC: NGELY; POMSOX: NGE) should move higher today after signing an agreement with a subsidiary of Santos Limited (ASX:STO) for the $40 million sale of NGE's 50% interest in PPL269 in Papua New Guinea.
NGE's 50% interest is held by its wholly owned subsidiary, Kirkland Ltd, and given NGE's capitalisation of just $17 million, it is a material transaction.
Under the sale agreement, Santos has agreed to fund Kirkland’s participating share of expenditure under certain pre-approved work programs and budgets.
Santos' subsidiary, Barracuda Ltd, will pay Kirkland US$32 million on completion of the sale; a further US$2 million if a Petroleum Retention Licence is granted over any area of PPL269; and a further US$6 million if a Petroleum Development Licence is granted over any area of PPL269.
If a development licence is granted prior to a retention licence, a one off payment of US$8 million will be payable in one sum.
Completion of the sale is dependent certain conditions and receipt of certain government approvals.
Santos has a 13.5% interest in the PNG LNG project that is on track to start producing liquefied natural gas this year.
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