Norwegian major Statoil ASA (STO - Free Report) has farmed-in to 80% of PetroFrontier Corp’s working interest in the four exploration permits and two exploration permit applications in the Southern Georgina play in Northern Territory, Australia.
The four exploration permits include EPs 103, 104, 127 and 128 and the two exploration permit applications are EPA 213 and 252. Statoil will take over the operatorship from Sep 1, 2013.
The state-run player has altered the terms of an existing farm-in deal covering assets in the Southern Georgina basin. In Jul 2012, the state-run player had received consent to acquire interest in about four PetroFrontier shale exploration permits in Northern Territory.
Per the deal, initially Statoil was to hold 25% interest in the four permits with the option of operating the second phase and increasing its stake to about 65%. Till date, the partners have jointly spent $30 million on initial exploration activities.
However, for the balance of 2013 and 2014, Statoil has decided to fully finance a 2D seismic package and the drilling and stimulation of four and six vertical well tests, estimated at $50 million. Apart from the money already spent on these permits, the company may put in another $160 million by the end of 2016 if it chooses to advance with further development over three phases.
Statoil will own 80% only at the end of phase 3, while its Canadian partner PetroFinance will hold 20%. Any additional cost after phase 3 will depend on each company’s working interest.
The Southern Georgina Basin asset spread over 14 million acre area is considered prospective. Statoil’s deal is in sync with its exploration strategy of accessing early and buying in large scales to de-risk the plays and grow organically through exploration activities. The company is believed to benefit from its current position in the play.
Statoil carries a Zacks #5 (Strong Sell). However, Zacks Ranked #1 (Strong Buy) stocks – Enerplus Corporation (ERF - Free Report) , Newpark Resources Inc. (NR - Free Report) and Gulfmark Offshore, Inc. – are expected to perform impressively over the short term.