Armour Energy (ASX: AJQ) will acquire exploration assets in the Cooper-Eromanga Basin from Oilex (ASX: OEX) as it builds a “substantial” Australian east coast oil and gas exploration and production company.
Oilex, meanwhile, says the all-paper deal will allow it to focus on its India and United Kingdom continental shelf interests.
The two companies have signed a conditional binding term sheet which provides that Armour will allocate somewhere between 24.4 million and 34.5 million of its shares to Oilex, the final total calculated to equal an agreed price of $906,500.
That will be determined after due diligence and negotiations on a detailed share sale agreement.
Armour, which already has gas interests in Queensland, Victoria and the Northern Territory, will acquire two petroleum exploration licences totalling 2,250sq km of ground, plus 27 petroleum retention licences covering 2,445sq km now subject of an arrangement between Oilex and Senex Energy (ASX: SXY).
Those retention licences will be acquired for $27 with the assumption of existing abandonment liabilities and the replacement in due course of $1.2 million in tenement bonds with the South Australian Government.
The Cooper Basin is one of Australia’s most prolific producer of oil and gas, delivering 1.5 billion barrels of oil equivalent so far. It was the historic core on which Santos (ASX: STO) was built.
Ground close to nearby discoveries
Armour said the assets being acquired from Oilex comprise a “substantial footprint” of exploration and production licences on the oil-rich western and northern flanks of the Cooper Basin.
The basin historically had a high exploration success combined with lower cost development “pathways”.
It also remains under-explored and under-developed, said Armour.
Proven oil fairways cut across, and lie adjacent to, the licence areas covered by the deal with Oilex. “Many nearby discoveries and fields provide analogues for future discoveries,” the Armour statement noted.
With these acquisitions, Armour will appoint Brad Lingo as chief executive officer.
Mr Lingo was formerly managing director and chief executive officer of Drillsearch Energy, acquired in 2016 by Beach Energy (ASX: BPT).
Armour said Mr Lingo built Drillsearch from a 200 barrels of oil per day producer into “a leading S&P/ASX 200 index Cooper Basin-focused oil and gas company”.
Mr Lingo described bringing Oilex’s ground into Armour as a “great combination”.
“Armour has consistently demonstrated its ability to not only undertake cost-effective, high-impact exploration, but also deliver development and cash generative production,” he added.
Oilex now free to focus on overseas projects
Oilex acquired the Cooper Basin ground in 2019, which had a carrying value of $331,000 at that time.
Managing director Joe Salomon said the board had pursued many options to achieve value for the shareholders from the Cooper ground without having the burden of financing and consequential dilution “during these difficult times”.
Now the company would be able to focus in core assets in India and expand its UK portfolio.
Oilex has announced plans to drill two wells at its Cambay project in India. The company’s other onshore project in Gujarat state, Bhandut, is on care and maintenance.