DRILLSEARCH has agreed to amend terms over its Copper basin acreage it shares with QGC which will result in an expanded and extended commitment to the ATP 9404 work program.
On 10 March, Drillsearch announced it had signed a binding term sheet with QGC covering new terms for the licence in central Australia.
Drillsearch has a 40 per cent stake and is the operator while QGC owns the remaining 60%.
The original agreement signed in 2011 required QGC to commit to a three-stage exploration and pilot production appraisal program of six wells to acquire the majority stake in ATP 9400P. QGC also agreed to fund $90 million of the first $100 million of that program.
Under the revised terms of the JV, the program will be consolidated into one along with the removal of QGC’s associated withdrawal rights. This will bring forward the remainder of QGC’s carry of the initial $100 million expenditure.
The work program will also be expanded from six wells to a commitment of 10-well program with potential for further acceleration.
Drillsearch will remain the operator of the licence until November 2015, at which stage QGC will have the option to assume operatorship.
Furthermore, QGC’s right to acquire all of Drillsearch’s interest in ATP 940P if a change of control transaction occurred before completion of the second stage of the exploration program no longer apply.
Drillsearch said the extension of the work program to explore and appraise ATP 940P reaffirmed Drillsearch’s vision for the project and represented a significant commitment towards commercialising unconventional gas in the Cooper basin.
“We are excited to drive the project forward as operator and we believe that the agreement to allow operatorship to remain with Drillsearch reflects our capability and our disciplined approach to this project, which is differentiated by our 3D seismic program,” Drillsearch managing director Brad Lingo said.
“The joint venture has the potential to deliver material returns for Drillsearch shareholders through proving up commercially viable gas from two distinct, recognised plays, namely the REM shale sequence and the Patchawarra tight gas sandstones.”
The ATP 9409P drilling program kicked off in September 2013, with results of the production testing program expected later this year.
Drillsearch hopes it can deliver 1.5 to 2 trillion cubic feet of gross gas in contingent resources by the end of 2014.
Due to the extension and expansion of the committed ATP 940P program, anticipated capital expenditure for Drillsearch’s unconventional business has increased, prompting the company to revise its capital expenditure guidance in FY2014 across its three business units to a range of $115-$130 million, up from $90-$110 million.
Drillsearch reiterated that its share of spending in ATP 940P, as well as its work programs elsewhere in the Cooper Basin, remain fully funded from internal cash flow through FY2016.