Santos Acquires Armour Energy's Interests in South Nicholson Basin Permits
Santos Ltd. has entered into a binding term sheet with Brisbane-based Armour Energy Ltd. to acquire the remaining 30% interest in its South Nicholson basin permits in northern Queensland and the Northern Territory in Australia, for a total consideration of approximately A$12.25 million.
Under the terms of the deal, a wholly-owned subsidiary of Santos will acquire Armour’s interest in a portion of the South Nicholson Basin Exploration Project in exchange for an initial payment of A$3 million upon execution of the term sheet, and a further A$9.25 million in cash upon deal completion. Armour will retain full ownership and operatorship of ATP(A) 1107, which covers 7,906 sq. km of the total project area.
In December last year, Santos had signed an agreement with Armour to acquire an initial 70% operated interest in the project for a total consideration of A$49.5 million, including cash and carry funding commitments. Under the terms of the agreement, if Santos planned to withdraw from the farm-in permits, other than ATP 1087, or did not enter into a key agreement, the tenure would have remained completely with Armour (as in the case of ATP(A) 1107).
The South Nicholson Basin Exploration Project (excluding ATP(A) 1107) covers an onshore area of approximately 40,751 sq. km, and is comprised of permits ATP 1087, ATP(A) 1192 and ATP(A) 1193 in Queensland, and EP(A) 172 and EP(A) 177 located in the Northern Territory. The project targets multiple unconventional prospective shale source rock reservoirs, providing multi-tcf exposure to two shale gas plays analogous to the McArthur basin shale gas plays. ATP 1087 contains six wells, including the Egilabria 2DW1 directional well, which was the first hydraulically stimulated horizontal shale well in Australia to flow hydrocarbons to the surface. Upon completion, Santos will hold an increased 100% operated interest in the permits.
With the closing of this deal, over the last 12 months, Armour will have received A$33.25 million in cash proceeds in relation to the South Nicholson Basin Project, whilst retaining a 100% operated interest in ATP(A) 1107.
“Retaining the ATP(A) 1107 Application Area enables the company to maintain substantial exposure to the unconventional shale gas play it proved-up with the Egilabria 2DW1 directional well, which was the first hydraulically stimulated shale gas well in Australia to flow hydrocarbons to surface. Operatorship and 100% ownership of this material application area provides Armour with the control and flexibility in progressing activity and maintaining exposure to the play potential of this area,” said Brad Lingo, Armour’s CEO.
ASX-listed Armour is currently focused on the discovery, development and production of natural gas and associated liquids resources in Northern Territory and north-west Queensland. In addition, the company also owns exploration interests in the Albertine Graben in Uganda.
The transaction is subject to customary closing conditions and is expected to close at the end of January 2021.