Melbana hooks Fortune 500 heavyweight for Beehive prospect sale
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Melbana will sell its Beehive prospect to EOG Resources, a Houston-based Fortune 500 company listed on the NYSE, in a deal that provides the company with an immediate cash injection but still allows it to retain an interest in any future production.
EOG is one of the largest crude oil and natural gas producers in the US and twice the size of Australia’s largest oil and gas producer, Woodside Petroleum (ASX:WPL), with an enterprise value of $US32bn ($42.3bn).
Last year, the major produced the equivalent of over 275 million barrels of oil and booked total revenues of $US11bn.
It is EOG’s first foray into Australia, which is a validation of the country as an investment destination. EOG states it intends to drill the Beehive prospect next year.
The sale of the WA-488-P permit, which hosts the Beehive prospect, is a massive win for Melbana, giving the company an immediate $US7.5m cash boost plus additional future payments linked to certain milestones and eventual production.
EOG has also agreed to further make contingent payments of $5m, half of which will be paid when the company enters the final year of the exploration permit and commits to drilling another well and the other half to be paid when a production licence is granted.
With respect to production, EOG will pay Melbana $US10m for every 25 million barrels of oil equivalent produced from the permit area.
“We are very pleased to have reached this agreement with a company of the calibre of EOG and look forward with great enthusiasm to the drilling of the first exploration well into the exciting Beehive prospect,” Melbana executive chairman Andrew Purcell said.
“This transaction allows Melbana to retain significant exposure to the upside of a potential Beehive discovery without being exposed to the costs of offshore appraisal and development, which can be expensive and challenging for a junior oil and gas company.
“The testing of this new and exciting play type in Australia, responsible for some of the world’s largest hydrocarbon discoveries, is what all the years of effort have been for and we are heartened that such an experienced and well-resourced company as EOG, known for being ahead of the curve when it comes to identifying new areas, will be responsible for the final stage of this journey.”
The Beehive prospect is a potentially massive (1.6 billion barrels of oil) hydrocarbon build up and represents a new type of opportunity to be pursued in Australia.
It is more common in other parts of the world and most of the largest hydrocarbon discoveries globally have been in this type of opportunity.
Melbana will retain full ownership of its adjacent permit areas, WA-544-P and NT/P87, that host the undeveloped Turtle and Barnett oil discoveries.
This article was developed in collaboration with Melbana Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.