ExxonMobil and Oil Search acquire interest in New Guinea Energy's PNG permit PPL 277
Thursday, March 8, 2012
- The first exploration activity near PPL 277 will be via Esso and OSH's drilling of Trapia-1 on the border of PRL 11 and PPL 277 during the first half of 2012.
New Guinea Energy (NGE) has signed agreements with Esso PNG Exploration, a subsidiary of ExxonMobil, and Oil Search (PNG) (OSH) regarding Petroleum Prospecting Licence (PPL) 277, currently held by Kingsbury, one of NGE's wholly owned subsidiaries.
Under the terms of the agreements, and contingent on receipt of the next extension of PPL 277 and other requisite government approvals, Esso and OSH will each acquire 50% of the working interests in PPL 277 in exchange for a total of US$15 million (Esso US$7.5 million, OSH US$7.5 million).
Subject to further conditions, NGE may become entitled to an additional US$20 million if a Petroleum Development Licence (PDL) is granted, and if commercial production occurs, a royalty over all revenue received from the petroleum produced and sold (Royalty).
It is difficult to assign a value to these additional rights as they depend on a number of factors and contingencies which are outside NGE's control, e.g. discovery of petroleum, size of petroleum discoveries, commercial viability of any development, timing of production, LNG pricing at the time of production and other economic and financing contingencies. For illustrative purposes, and assuming all of the contingencies have been met, NGE's view of the potential value to NGE for recovered petroleum from PPL 277 is summarised in the table below (applying current economic parameters).
The first exploration activity near PPL 277 will be via Esso and OSH's drilling of Trapia-1 on the border of PRL 11 and PPL 277 during the first half of 2012. Trapia is a large structure within PRL 11 close to the PNG LNG infrastructure and east of the Hides and Angore fields and may overlap into PPL 277.
NGE Chief Executive Officer, Grant Worner commented, 'These agreements are a potential game-changer for NGE and represent a tremendous outcome for our company as they:
- recognise the value of NGE's properties;
- reduce NGE's risk and capital obligations associated with working in the PNG highlands; and
- provide NGE with high-side exposure and a source of ongoing revenue in the event of commercial development.'
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