Buru Energy Ltd (ASX:BRU) and Energy Resources Ltd (EnRes, a subsidiary of Mineral Resources Limited) have agreed to restructure their interests in L20-1 in the onshore Carnarvon Basin In Western Australia through a farm-out transaction agreement.
Under the farm-out terms, Buru will assign a 25% permit interest and operatorship of L20-1 to EnRes such that the permit interests will be Buru 25% and EnRes 75%.
As consideration, EnRes will carry Buru through the first two exploration wells expected to be drilled in 2023, and other agreed exploration and overhead costs.
In return for this additional financial carry under the grant, Buru and EnRes have agreed to enter into a carbon capture and storage (CCS) joint venture.
Focus on Rafael gas discovery
Buru Energy executive chairman Eric Streitberg said: “We are delighted that we have been able to come to an agreement with EnRes that achieves each company’s objectives.
“The farm-out transaction will allow EnRes to bring the expertise of its highly successful Perth Basin operating team to the L20-1 area and allow Buru to focus on its very exciting Rafael gas condensate discovery in the Canning Basin and on its energy transition businesses.
“The CCS activity will reflect the underlying permit equities with Buru and EnRes working together closely and applying and expanding their respective technical and commercial inhouse expertise in the CCS Feasibility Study with the support of the Commonwealth Grant.
“The CCS program will also assist Buru to more fully develop its technical and commercial expertise for its Canning Basin gas commercialisation activity, where CCS has the potential to be a significant project enabler by decarbonising its planned gas developments.”
Application area
In October 2020, Buru Energy and EnRes applied for block L20-1 as part of the 2020 state government onshore petroleum acreage release on a 50/50 joint venture basis with Buru as operator.
The L20-1 block covers the onshore portion of the Peedamullah Shelf, a geological unit bordering the main oil and gas productive area of the Carnarvon Basin.
Buru’s and EnRes’ bid was successful, with the joint venture being offered the award of the permit arising from L20-1 in March 2021.
With the completion of the heritage agreement with the Thalanji people, it is anticipated that the permit will now be granted to the joint venture in accordance with the bid terms, with Buru and EnRes each holding an initial 50% interest.
Farm-out transaction
Under the farm-out transaction agreement, EnRes will assume the operatorship of the permit after it is granted and be assigned a 25% interest from Buru such that the permit interests will be Buru 25% and EnRes 75% and operator.
The farm-out transaction agreement is conditional on the grant of the permit and the registration of the farm-out transaction agreement as a dealing against the permit.
In return for the assignment of the interest and the operatorship, EnRes will carry Buru for the exploration program of the first two wells to be drilled in the permit to satisfy the minimum work requirements during the first two permit years.
EnRes will also carry Buru for its share of joint venture exploration overhead costs (G&G) during that time.
CCS Feasibility Study
Under the equity alignment agreement, Buru will undertake the CCS Feasibility Study work program as an operator on behalf of the CCS joint venture and EnRes will be the operator of the CCS Joint Venture in connection with any future GHG permit that is jointly granted to EnRes and Buru over all or parts of the L20-1 area.
As consideration for its aligned equity interest in, and operatorship of, the CCS Joint Venture, EnRes will contribute funds towards the CCS Feasibility Study to match the Buru Commonwealth Grant of up to $7 million.