NEW GUINEA Energy (NGE) can sell part of a petroleum prospecting licence to a Santos subsidiary but will have no further time to explore another of its prospecting licences after an extension bid was refused.

NGE subsidiary Kirkland signed a deal to sell a 50 per cent stake in PPL 269 to Santos subsidiary Barracuda for US$40 million in the first quarter of 2014, after proposed buyer ExxonMobil backed out.

PPL 269 occupies an area of 899,500 hectares in Papua New Guinea’s Western Province, which is close to infrastructure.

Under terms of the sale agreement, Santos has agreed to fund Kirkland’s participating share of the expenditure under certain pre-approved work programs and budgets.

Kirkland was paid US$32 million on completion of the transaction.

Santos will pay a further US$2 million in cash if a petroleum retention licence is granted over any portion of the permit, and a further US$6 million if a petroleum development licence is granted.

If a development licence is granted before a retention licence, a one of payment of US$8 million will be paid.

NGE executive chairman Michael Arnett said he was pleased the deal was done.

“The funds secured from this transaction now give the Company the ability to consider future growth opportunities and we look forward to updating shareholders of these considerations in the near future,” he said.

Funds from the sale will be used to complete NGE’s planned seismic program over the nearby PPL 267, which aims to link the seismic grid near the Panakawa-1 well acquired by NGE in 2006 and 2009 with a seismic grid near the 267-1 Lead.

In its most recent quarterly activities report, NGE said it was “monitoring the market for seismic services” in anticipation of the program commencing.

The other remaining stakeholders in PPLG 269 are Mitsubishi Corporation subsidiary Diamond Gas Foreland (20%) and Talisman Niugini (30%).

At the same time, the future of the 1.5 million hectare PPL 265 is in the balance after Papua New Guinea’s minister for Petroleum and Energy, William Duma refused to grant NGE an extension of its licence, which the group had requested in 2012 following the results of a seismic study.