Santos oil and gas deal gives Melbana cash injection, royalty

The sale of permits located offshore north Western Australia to two majors has boosted Melbana’s coffers by about $400k and secured it an interest in future oil and gas production. 

Melbana Energy (ASX:MAY) has locked in a low-risk interest in a fourth exploration well with subsidiaries of Australia’s Santos (ASX:STO) and Malaysia’s SapuraOMV agreeing to buy permit AC/P50.

The pair also have the option to acquire permit AC/P51.

Both permits are located in the Vulcan sub basin of the oil-rich Bonaparte Basin that sits offshore north Western Australia.

Melbana sold its 55 per cent stake in the two permits to joint venture partner Rouge Rock in 2018. The terms of the initial divestment gave Melbana an interest in any future farmout or sale of the permits.

As a result of this new deal, Melbana will receive $397,000 in cash and is entitled to a 10 per cent share of any future royalty that Rouge Rock receives for eventual production from the AC/P50 permit.

If Santos and SapuraOMV decide to exercise the option to acquire permit AC/P51, Melbana would earn itself a similar cash sum and contingent royalties.

“This transaction gives Melbana’s shareholders an interest in yet another exploration well – the fourth in a series commencing with the two wells in Cuba and finishing with this well and the one expected to be drilled next year into the Beehive structure,” executive chairman Andrew Purcell said.
 

Majors knocking on the door

Melbana has been doing some serious deal making this year, most recently securing a Houston-based Fortune 500 company as the buyer of its WA-488-P permit, which hosts the Beehive prospect.

NYSE-listed EOG Resources, one of the largest crude oil and natural gas producers in the US, will hand over an initial $7.5m in cash followed by further contingent payments of $5m.

The major also agreed to pay Melbana $US10m for every 25 million barrels of oil equivalent produced from the permit area.

EOG is twice the size of Australia’s largest oil and gas producer, Woodside Petroleum (ASX:WPL), with an enterprise value of $US32bn ($41.1bn).

Last year, the company 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 plans to drill the Beehive prospect next year.

Melbana also has a major partner largely funding and drilling its Block 9 project in Cuba.

Angolan national oil company Sonangol can earn a 70 per cent stake in the project by funding 85 per cent of the costs of drilling the Alameda-1 and Zapato-1 wells.

The JV partners will begin drilling mid-this year to test four targets estimated to host about 236 million barrels of oil (best case estimate).

 

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.

The post Santos oil and gas deal gives Melbana cash injection, royalty appeared first on Stockhead.

Barry Stroman was a reporter for Zerg Watch, before becoming the lead editor. Barry has previously worked for Wired, MacWorld, PCWorld, and VentureBeat covering countless stories concerning all things related to tech and science. Barry studied at NYU.

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