REY RESOURCES is set to buy a disputed 50 per cent stake in EP 487 from private company Backreef Oil, subject to a decision of the Western Australian State Administrative Tribunal (SAT), due in late January.
Also known as the Derby block, which covers some 506,200 hectares surrounding Derby, it is operated by Australian company Oil Basins, which currently holds the remaining 50% stake.
Oil Basins applied to the SAT in March to take full ownership of the permit, alleging that Backreef had failed to perform its role.
Should Oil Basins win the appeal, Backreef will not have the stake to sell – with Oil Basins even disputing Backreef ’s ownership of that 50% stake in its announcement.
“The proposed Rey transaction presently has no currency as it is highly conditional,” Oil Basins said.
The sale agreement will see Rey subsidiary Rey Lennard Shelf acquire Backreef ’s stake for either $2 million to be paid on grant of a production licence in respect of EP487 or a 2% royalty on future production.
Backreef Oil signed a deal in 2012 to sell the stake to Buru Energy – but this agreement lapsed on 31 December 2014 after both parties agreed not to extend the transfer date further.
Buru had agreed to acquire the permit for $3.5 million, saying in its announcement that the lapse of the agreement also meant it could avoid any costs associated with the litigation and the cost of early stage exploration activity.
The Rey deal is conditional on a conclusion of the SAT appeal which satisfied the company, as well as approval from the Foreign Investment Review Board.
Rey will bear the cost of the SAT proceedings and assume conduct of them should the deal end in its favour, as well as other legal claims on Backreef by Oil Basins.
These claims, in the WA District Court and Magistrates Court, relate to expenses incurred on management of the Derby Block to date.
The news came after the WA Department of Mines and Petroleum granted Oil Basins a nine month extension to the Year 1 work program over the block.
The extension means Oil Basins will not be in breach of the conditions of its permit if it carries out a new 500 kilometre seismic survey by 31 December 2015.
Oil Basins said the extension would allow it to carry out the survey after the rainy season – as well as to take advantage of better availability of survey equipment from survey operator Terrex Seismic.