Karoon Gas Australia Ltd. of Melbourne has made a binding sale and purchase agreement for the acquisition of partner Pacific Exploration & Production Corp.’s 35% interest in five Santos basin blocks offshore Brazil.
The purchase price is as much as $20.5 million, which includes an upfront cash payment of $15.5 million and a deferred contingent payment of $5 million payable on first production reaching a minimum of 1 million boe from the five permits.
The blocks are designated S-M-1037, S-M-1101, S-M-1102, S-M-1165, and S-M-1166. They contain the Kangaroo and Bilby light oil discoveries made in 2013 and the Echidna light oil find in 2015.
The move follows Pacific E&P’s application for insolvency protection with the Superior Court of Justice in Ontario in April.
The agreement is conditional on approval from the Brazilian Petroleum Regulator and an approval order from the Ontario court.
The acquisition returns Karoon to a 100% equity position in the five permits, which it was awarded in a bidding round in March 2008. Karoon then farmed out a 35% interest to Pacific E&P in 2012.
Karoon Managing Director Robert Hosking says the buyout enables Karoon to find a new farm-in partner to help with funding of the propped Echidna appraisal drilling program.
Karoon plans to install an early production system (EPS) on the field, contingent on the continued success of appraisal drilling.
The EPS is likely to comprise two or more production wells that will provide important technical information about reservoir performance and form the basis of a full field development. In addition, the EPS would provide an analogue for understanding the nearby Kangaroo oil find and any similar discoveries in the company’s permits.
A new 3D seismic survey is also planned to enable better risking and ranking of other prospects in the permits. Further discoveries would be tied back to a centrally located floating production, storage, and offloading vessel.