CUE Energy Resources Ltd has executed agreements with Beach Energy Limited to acquire equity in North West Shelf exploration permits WA-359-P and WA-409-P in the Carnarvon Basin, offshore Western Australia, which contain the giant Ironbark gas prospect.
Under the terms of the WA-359-P Farmout Agreement, Beach will acquire 21% equity and free carry Cue for 4% of the cost of drilling the Ironbark-1 exploration well in WA-359-P. Beach will also reimburse Cue $900,000 for past costs.
The agreement is conditional on BP exercising its option to acquire 42.5% equity in the WA-359-P (1), Cue obtaining an extension to the current permit end date and other customary approvals.
Cue has also granted Beach an option over 7.5% equity in exploration permit WA-409-P, adjoining WA-359-P. If Beach exercise this option, Beach will free carry Cue for 7.5% of the costs of drilling a well in WA-409-P. Cue will also receive a 10% royalty on all future revenue from Beach’s 7.5% equity in the permit. The option may be exercised until July 2019.
Cue has identified the Ironbark as a giant Mungaroo Formation prospect that is mapped with an area of up to 400km2 and a best technical estimate of 15 trillion cubic feet (tcf) of prospective recoverable gas resource based on an internal assessment performed by Cue. Wood Mackenzie estimates that the North West Shelf LNG plant and infrastructure will have spare capacity from 2021.The Ironbark prospect is less than 50km from the North Rankin platform (North West Shelf LNG) and in close proximity to Pluto and Wheatstone LNG infrastructure, providing cost effective commercialisation options.
Cue CEO Matthew Boyall said these agreements are another major step forward in securing partners and funding to drill the Ironbark well.
“They display the confidence that another major company has in Cue’s Ironbark prospect. Including the BP 42.5% option, Cue has now conditionally secured 75% of the funding for the Ironbark-1 well and retains potential long term value from any success in WA-409-P through a revenue royalty.
“Cue currently retains 36.5% uncommitted equity in WA-359-P and we continue to talk to companies interested in forming a Joint Venture together with Beach and BP to share in this high impact opportunity.”