Santos has conditionally exercised its option with Melbana Energy to acquire an 80 per cent interest in the permit containing the Beehive prospect offshore northern Australia.
Beehive, which has an area of 4074 square kilometres, is in the Bonaparte Gulf, Petrel Sub-Basin between the producing Blacktip gas field and the undeveloped Turtle and Barmett oil discoveries.
The giant prospect is in 40 metres water depth and defined by a tight grid of high quality 2D seismic data, is one of the largest undrilled hydrocarbon prospects in Australia.
Both the companies have agreed that upon the satisfaction of the conditions Melbana will transfer an 80 per cent interest in the permit in return for the transferee(s) funding 100 per cent of the cost of the Beehive-1 well.
Santos is in active discussions with several parties with respect to participation in the Beehive-1 exploration well.
Melbana chairman Andrew Purcell said the company was pleased to continue working cooperatively with Santos given the commitment the company had shown to Beehive.
“Santos’ decision to farmdown its large equity interest in Beehive is entirely consistent with its recently stated strategy of optimising its portfolio through acquisitions, disposals and farmouts, particularly in northern Australia where it is working to reduce its equity in the Barossa field and Darwin LNG to 50 per cent or less,” Purcell said.
“With 388 million barrels of oil equivalent of prospective resource (best estimate) and potentially 1.6 billion barrels of oil equivalent of prospective resource (high estimate) which, if proven, would prove transformative for each of our companies and for northern Australia.
“This variation to our agreement with Santos takes us a critical step closer to drilling the largest undrilled structure in Australia.”
However, it has been agreed that Santos is not required to submit an application for the transfer of an interest in the permit until it has successfully concluded a farm out for some of its right to acquire that interest.
Santos has also indicated that the work it has done on identifying rig availability suggests the drilling of the Beehive-1 exploration well will not occur prior to the end of the current permit year (December 2020).
Melbana has agreed to allow Santos until March 4, 2020 to complete a farmdown of its right to acquire an 80 per cent interest in the Permit.
If the farmdown is successful, the parties would then collaborate to secure the necessary extension to the current permit year to align the drilling of the Beehive-1 well with rig availability.
As a result of Santos having more time to execute a farmdown, Santos has agreed to complete (at its expense) an application for an environment permit for the drilling of the Beehive-1 exploration well.
Santos’ commitment to producing an EP, along with its identification of a firm rig slot for drilling the well, is expected to assist with the application for request to the current permit year.
Melbana would remain free carried for its 20 per cent interest in the exploration well, following the above conditions are satisfied.