THE ROADHOUSE BOWSER: Empire Oil & Gas (ASX: EGO) has reached a deal with its major shareholder and Joint Venture partner ERM Power (ASX: EPW), which the company said is aimed at unlocking the full value of its exploration acreage in Western Australia’s Perth Basin.
Under the agreement, Empire will gain control of the largest acreage package in the Perth Basin.
It will own 100 per cent of ten of the 12 tenements in this particular package, including the Red Gully gas and condensate project, and approximately 80 per cent of the further two tenements.
The company claim this acreage package covers more than 12,000 square kilometres, representing more than 50 per cent of the Basin.
The transaction is subject to regulatory and contractual approvals and an Independent Expert deciding it is fair and reasonable to Empire’s shareholders.
Should said Independent Expert reach such an opinion, the transaction will then require the approval of Empire shareholders excluding ERM.
The agreement involves ERM selling its interests in EP389, including Red Gully, and seven other tenements to Empire for $16.34 million.
ERM will provide Empire an interest-free loan to fund the purchase of the assets, repayable by Empire on the earlier of a disposal of the Red Gully processing Facility or two years.
“This deal will deliver Empire 100 per cent ownership and revenue of our cornerstone production asset, Red Gully, and the largest prospective oil and gas acreage holding in the Perth Basin,” Empire Oil & Gas chief executive Ken Aitken said in the company’s announcement to the Australian Securities Exchange.
“This deal will mean that Empire will receive 100 per cent of all the cash from selling condensate and the additional cash from selling gas to Alcoa under Tranche 2 of the Gas Supply Agreement which we expect to commence in about a year’s time.
“Based on the current production rates of eight terajoules (8Tj) and 360 barrels of condensate per day, this is over $25 million a year.
“The simpler ownership structure will in turn maximise our ability to attract the highest quality exploration partners and investors to help fund what is expected to be an aggressive exploration drive over the next few years to unlock the value of our highly prospective holding.
“The deal also provides funding solutions via both the vendor finance arrangements and the share placement, which will give us the time and financial stability to commence our work programs and seek longer-term solutions to funding an aggressive exploration drive.”