State Gas is at odds with its partner and ‘the biggest gas field discovery in many years’ might be the prize
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State Gas’ partner in the Reid’s Dome project in Queensland argues the junior gas explorer is not entitled to acquire the remaining 20 per cent stake to give it full control.
Dr Bruno Denantes, a director of UK-based Dome Group, said in an email to Stockhead that suggestions State Gas had acquired a 100 per cent interest in the Reid’s Dome project are incorrect and that Dome Petroleum Resources still retains a 20 per cent stake.
“I wish to make it clear, not least to the shareholders in both Dome and State Gas, that there is no truth in the suggestion, which is entirely unfounded, that State Gas has acquired the whole of Dome’s interest in the Reid’s Dome project,” he said.
State Gas told the market last Wednesday it was acquiring the remaining 20 per cent in line with the provisions of the joint operating agreement.
Until recently Dome owned a 40 per cent stake in the project.
But Mr Denantes said that following recent discussions between Dome and State Gas on a number of issues, Dome offered to sell a 20 per cent share to State Gas on certain conditions.
One of those conditions was that Dome would still have a 20 per cent share.
“That offer was accepted by State Gas,” Mr Denantes said.
“The two companies’ agreement in this respect has clearly given rise to confusion and I am glad to have the opportunity of setting the record straight on this matter.”
State Gas inherited Dome as a JV partner when it acquired its initial 60 per cent interest in the Reid’s Dome project.
Dome was a joint venture participant from more than 10 years earlier when the permit was operated by other parties, including Senex Energy (ASX:SXY) – back when it was Victoria Petroleum.
State Gas says it understands that Senex gave up its interest in the permit due to difficulties with its JV partner at the time.
State Gas director Greg Baynton said last week that the reduction of Dome’s stake to 20 per cent took it below the minimum interest stipulated under the joint venture agreement.
Mr Baynton told Stockhead on Monday that State Gas is now consulting with its lawyers and is “very confident of the process we are following”.
State Gas’ lawyers were responding to Dome in writing on Monday.
“This is a matter we do not intend to discuss via the media, but we will be exercising all of our rights under the joint operating agreement (JOA) and the laws of Queensland (the legal jurisdiction for the JOA),” Mr Baynton explained.
However, Mr Denantes claimed that both companies had agreed they would continue in the joint venture and detailed arrangements were set out in respect of the costs of appraising and drilling the first and all future wells.
He added that Dome and State Gas also agreed that “a third partner was to be brought into the project”.
“State Gas and Dome both agreed to all these terms, and State Gas indicated that it looked forward to continuing to work with Dome in future,” Mr Denantes told Stockhead.
On the same day State Gas revealed it was acquiring the remaining 20 per cent stake last week, the company announced better-than-expected results from a well at the Reid’s Dome project that it was planning to plug and abandon.
The drilling results from the Nyanda-4 well indicated good gas shows from about 392m, and an overall increase in gas content with depth. Data suggested there were still gas shows at the total depth of 1200m.
Mr Baynton told Stockhead it could be “the biggest gas field discovery in many years in Queensland” and potentially compares with the Scotia Field owned by Australian oil and gas giant Santos.
He said the discovery was well-timed given the gas shortage on Australia’s East Coast.
Mr Denantes agreed the gas find looked to be “very considerable”.
He said State Gas and Dome agreed that the two companies would market separately their respective shares of the gas produced from the Reid’s Dome project.
“We agreed we would remain in the JV to produce and sell our own gas,” Mr Denantes said.