Omega Oil and Gas boosts Taroom Trough commercialisation options on removing liquids royalty

• Omega Oil and Gas reaches deal to extinguish legacy 3% gross overriding royalty interest over Taroom Trough assets
• Company to pay TAG Oil US$1m to remove the royalty
• Royalty removal grants company greater flexibility to pursue commercialisation options

Special Report: Omega Oil and Gas has greater flexibility to pursue commercialisation of its Taroom Trough assets after reaching an agreement to extinguish a legacy 3% gross overriding royalty over future liquids production.

Vancouver-headquartered TAG Oil secured the royalty deed over Potential Commercial Areas 342 and 343 as well as PL17 in Queensland’s Bowen Basin in October 2020 when it sold them to Omega Oil & Gas (ASX:OMA)  two years prior to the latter’s listing on the ASX.

The company will pay TAG US$1m from its cash reserves of $13.6m as of March 31, 2025, to extinguish the royalty.

It represents a positive outcome for OMA given the future potential for liquids production from the Canyon project.

“This value accretive transaction highlights Omega’s conviction that liquids (oil and condensate) will likely form a significant part of future production from Omega’s Taroom Trough assets,” managing director Trevor Brown said.

“Following our successful flow test at Canyon-1H, an assessment was made of the commercial opportunities within Omega’s assets.

“Discussions with TAG, who have focused their portfolio on Egypt, yielded a win-win opportunity for both companies to agree this deal, with only a modest impact to Omega’s balance sheet.

“Omega’s 100%, operated equity position in our tenements, are now free of any royalty interests, providing the company with even greater flexibility to pursue the commercialisation of these assets.”

Listen: Omega’s Taroom Trough success

Canyon project

The optionality for OMA has increased after its key Canyon-1H well flowed significant amounts of light oil of excellent quality in addition to gas.

During flow-testing, the well flowed at a peak rate of 452 barrels of oil and 600,000 standard cubic feet of gas per day and a sustained rate of 321bpd of oil and 472,000scfd gas from a 650m horizontal interval in the target Canyon sandstone.

This translates to a sustained rate of 987bpd of oil and 1.45 million (MM) scfd of gas, or ~7.4MMscfd gas equivalent, from a 2000m lateral.

Further evidence that an extensive oil and gas petroleum system is present at the Canyon project within the Taroom Trough was received when the company completed a cased hole logging program at the Canyon-2 vertical well.

This tool was not run when Canyon-2 was first evaluated following drilling in 2023 with the open hole logs obtained at the time returning sub-optimal results due to difficult hole conditions.

By contrast, the new logs are of very high quality and indicate that a thicker and higher-quality pay interval is present within the Canyon Sandstone interval at the well, which corresponds with the zone tested in Canyon-1H.

Canyon-2 had penetrated the Canyon Sandstone 167m shallower than at Canyon-1.

Notably, the enhanced reservoir properties observed from log analysis may indicate that reservoir properties are likely to improve further in the eastern part of the Canyon project area where the prospective Permian interval is up to 800m shallower than at Canyon-1.

This article was developed in collaboration with Omega Oil and Gas, 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