Melbana Energy (ASX:MAY) to sell Beehive prospect to EOG

• Melbana Energy (MAY) subsidiary, Finnis Offshore Exploration, has entered into a sale and purchase agreement for the Beehive prospect
• An EOG Resources subsidiary will acquire permit WA-488-P, which covers the prospect and surrounding parts of the Joseph Bonaparte Gulf
• Finnis will receive about A$9.7 million upfront for the sale, plus additional contingent and production-linked payments in the future
• Once the permit is acquired, EOG plans to drill an exploration well targeting the Beehive prospect in 2022
• Melbana Energy is up 4.55 per cent and trading at 2.3 cents per share

Melbana Energy (MAY) subsidiary, Finnis Offshore Exploration, has entered into a sale and purchase agreement for the Beehive prospect.

Specifically, the sale and purchase agreement is for the sale of permit WA-488-P, an offshore exploration area which includes the Beehive prospect. Permit WA-488-P is an approximately 700 square kilometre 3D survey, with an extensive amount of 2D seismic coverage.

The exploration area is located in the Joseph Bonaparte Gulf, a body of water meeting the state border between Western Australia and the Northern Territory. 

Under the agreement, Finnis will sell its 100 per cent interest in the permit to EOG Australia, a subsidiary of U.S. oil and gas company, EOG Resources. In return, the company will receive an upfront consideration of US$7.5 million (about A$9.7 million), subject to satisfaction of the customary conditions.

Finnis will also receive other payments for the sale in future, including US$5 million (approximately A$6.4 million) in contingent payments. Half of this would be payable if EOG Australia enters the final year of the exploration permit, with the other 50 per cent payable if EOG Australia is awarded a production licence in the permit.

Another potential future payment would be production-linked payments of US$10 million (roughly A$12.9 million), for every 25 million barrels of oil produced by EOG Australia from the permit area. 

Once the permit is acquired, EOG plans to drill an exploration well targeting the Beehive prospect in 2022. 

Melbana Energy’s Executive Chairman, Andrew Purcell, commented on the company’s asset sale to EOG.

“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,” he 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,” he added.

Melbana Energy is up 4.55 per cent, trading at 2.3 cents per share at 10:41 am AEST.