MOSMAN Oil and Gas is moving forward on its acquisition of the South Taranaki Energy project (STEP) assets in New Zealand from Australia’s Origin Energy.
Having identified the Origin assets as its target in late August, Mosman announced in late September that it had raised £1.5 million through a placement run through the London Stock Exchange’s Alternative Investment Market.
Alongside a deposit of NZ$500,000 paid on announcement of the deal and another NZ$4 million raised through the sale of a 2 per cent royalty over the STEP assets to Canada-based Ridge Royalty Corporation, Mosman now has enough funding to move ahead with the acquisition.
Mosman plans to finalise its agreement with Ridge Royalty in early October, providing an assuriance about future funding to Origin by 9 October.
Origin is to sell its entire STEP package to Mosman and private company WRDLS, with the companies to hold stakes of 70% and 30% respectively, for a sum of NZ$10 million.
Mosman’s share of the project cost is NZ$7 million with the first tranche payable at NZ$4.9 million and the second tranche, payable in six months following completion of the deal, of NZ$2.1 million.
A company statement said net proceeds from the placement would be used to pay for both tranches of the deal and for general working capital purposes.
Mosman chairman John W Barr said the STEP project would deliver immediate production, reserves, facilities and cash flow to the company when it was acquired, making it a transformational deal.
“Numerous opportunities to increase production in the short term post completion have been identified and there is also significant upside production growth in the further development of the producing Manutahi oilfield that has an identified oil originally in place figure of 30 million barrels,” he said
Mosman said lower oil prices had made the project available at a good price.
“This is possibly the best time to acquire reserves and production, both of which are attributes of the proposed acquisition,” the company said.
Mr Barr thanked shareholders for their support in the placement.
“With their backing we have been able to reach a major milestone in being able to fund a 70% interest in the STEP assets, a producing and cash flow generating project with significant upside potential,” he said.
“We are excited about this fantastic acquisition and the future prospects it offers Mosman.”
Among the assets that make up the STEP project are the Rimu, Kauri and Manutahi fields, as well as the Rimu production station.
Mosman said the facilities were subject to a major refurbishment in 2014 and have been producing an average of 603 barrels of oil equivalent since restarting production in October that year.