MOSMAN Oil and Gas has withdrawn from the proposed acquisition of the South Taranaki Energy Project (STEP) from Origin Energy and operations at Murchison, citing falls in the oil price for its decision.
Established in early October last year, the deal would have seen Mosman acquire 70 per cent, and New Zealand based High Peak Royalties (HPR) 30%, of the STEP assets for a total consideration of NZ$10 million.
As foreshadowed in January, Mosman said the fall of oil prices below US$40 a barrel meant the acquisition no longer met its investment criteria – leading it to cancel the sale and purchase agreement.
Mosman had attempted to renegotiate with Origin, but said in an announcement that these did not lead to a change of either purchase price or conditions.
“Additionally, Mosman has not yet received the government approvals that are necessary preconditions to be able to complete the STEP acquisition,” it said.
“Certain issues have been raised by New Zealand Petroleum and Minerals (NZPAM) including the capability to guarantee the decommissioning liability that would occur at the completion of production operations.”
Mosman was also awaiting NZPAM approval to start a survey over the Murchison project – meaning that its planned drilling of those assets was now under review.
Origin will now repay Mosman’s NZ$500,000 deposit, while the joint venture arrangement with High Peak Royalties has been cancelled.
In an announcement, Mosman executive chairman John W Barr said he was sorry the deal was not going ahead.
“After months of work by the board, staff and consultants on STEP, it is extremely disappointing that the state of the global economy and specifically the oil price has led to this outcome,” he said.
“Mosman intends to minimise expenditure to preserve cash and asset values, with the immediate priority now being to focus on our other projects and continue to evaluate new opportunities.”
High Peak Royalties (HPR) chief executive Simon Fyfe said in his company’s announcement that it was disappointing that changes in market circumstances had led to this outcome.
“This proposed acquisition provided a pathway to a longterm royalty interest derived from the production assets,” he said.
“HPR has a diverse portfolio of royalty interests and we will continue to evaluate new royalty opportunities, and add to our existing portfolio in a selective and disciplined way.”
HPR will seek to deploy its funding resources elsewhere as it reviewed its royalty investment opportunities, the company said.