Australian gas producer Origin Energy has agreed to farm in to two Senex-operated areas in central Australia's Cooper Basin, the companies announced Monday.
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Under the agreement, Origin will acquire an initial 40% stake in parts of exploration concessions PEL 516 and PEL 115, known as Area A, and a 30% stake in parts of PEL 514, known as Area B, with an option to later increase its working interest in both areas by another 10% and become operator.
Independent exploration company Senex is currently operator of the concessions with a 100% working interest in Area A and an 80% interest in Area B. Its 20% partner in Area B is Sydney-based independent Planet Gas Ltd.
Area A covers two areas south and west of the gas and oil processing center of Moomba, while Area B lies north of the hub.
Origin will invest an initial A$97 million ($87 million) on exploration on the blocks and a further A$72 million if it exercises its option. Senex will initially remain operator of the two areas, which cover approximately 1,900 square km (734 sq miles).
Senex will retain operatorship of the permits during the two-stage work program, with Origin having the option to become operator thereafter. The Area B farm-out is restricted to the concession's deeper gas-prone structures -- Senex will retain its interest in the oil-prone shallows.
The joint venture's spending could total up to A$252 million, with Senex's share 100% free carried up to A$185 million on the agreed initial two-stage work program and Senex, Origin and Planet having the option to contribute an additional A$67 million on a participating interest basis if an additional work program is approved.
The two companies said they expect the transaction to close by end June. Origin, together with joint venture partners ConocoPhillips and China's Sinopec, is developing Australia Pacific LNG, one of three LNG export projects being built on Curtis Island off the port of Gladstone in Queensland, eastern Australia. Gas demand for the projects, plus delays to coal seam gas exploration and production in eastern Australia, have seen the three projects' developers look further afield for supplies.
Last week Origin said its $22.3 billion, 9 million my/year APLNG project was 60% complete and remained on track to deliver its first cargo in mid-2015.
"We are pleased to be working with Senex Energy given its proven track record operating in one of Australia's largest onshore hydrocarbon provinces," Origin's upstream CEO Paul Zealand said Monday in a statement.
Senex managing director Ian Davies said: "Origin is a natural partner for Senex to accelerate commercialization of a potentially massive gas resource." Separately, Brisbane-based Senex announced its financial results for the six months to December 31, the first half of its 2014 financial year. The company said its net half-year production fell 1.5% year on year to 650,000 barrels, equivalent to about 3,550 b/d. "We expect production to increase in the remainder of FY14 following drilling success across our high margin Cooper-Eromanga oil fields," Davies said. UNTAPPED RESOURCES
The Origin-Senex deal is the latest in a growing list focusing on the Cooper Basin's largely untapped unconventional hydrocarbon resources.
Consultancy RISC has estimated Australia's unrisked tight gas and shale gas resource potential could be around 230 Tcf, including 44 Tcf in the Cooper and partially overlapping Eromanga Basin.
Last year Scott Brown, CEO of Real Energy, which owns 100% of three Cooper Basin permits, said he estimated the basin holds more than 100 Tcf of unconventional gas and admitted he was preparing the company to be taken over.
In 2012, Bernstein Research wrote: "While it remains too early to tell who will be the winners in the race for Australian shale, we favor E&P [companies] with exposure to the Cooper Basin."
In mid-2011, BG's Australian subsidiary QGC formed a joint venture with Australia's Drillsearch to explore for shale and tight gas in Cooper Basin. Santos, which operates the Moomba oil and gas processing facility, produced Australia's first commercial shale gas at its Moomba-191 field in late 2012.
But Senex is the basin's largest operator by area, with almost 11,000 sq km under its operatorship.
Other recent Cooper basin deals include last month's farm-in by New Standard Energy to Ambassador Oil & Gas' Cooper Basin exploration permit PEL 570. In December 2013 US shale pioneer Magnum Hunter Resources became New Standard's largest shareholder.