Chevron Corp. has signed a potential multimillion-dollar farmin deal with Adelaide-based Beach Energy Ltd.’s acreage in the Cooper basin in Australia.
The deal means that Beach will transfer up to 60% of its interests in South Australian permit PEL 218 and Queensland permit ATP 855 to Chevron in two stages.
The first stage involves transfer of 30% in PEL 218 in exchange for $36 million (Aus.) in cash and a $95 million carry.
This stage also includes an 18% interest in ATP 855 transferred to Chevron for $59 million cash.
If Chevron elects not to proceed after the first stage, the interest held by Chevron will revert back to Beach for no consideration.
If Chevron does elect to continue, Stage 2 will mean Beach transferring another 30% interest in PEL 218 to Chevron for $41 million in cash and a $47 million carry. It will also provide Chevron with another 18% in ATP 855 for $36 million.
At the end of Stage 2 Chevron will make a decision whether to go ahead with more work. If it does go ahead it will spend a further $35 million on the program.
However, if Chevron doesn’t proceed after Stage 2 Beach may elect to receive a reassignment of the interests then held by Chevron.
The key to the deal is the deep Nappamerri Trough in which Beach has been working hard to prove up commercial unconventional gas reserves.
Beach says its Encounter-1 and more recent Holdfast-1 wells in PEL218 had proved that the tight Permian strata could flow at significant rates. Meanwhile in ATP855 the joint venture between Beach and Icon Energy Ltd., Queensland, has just finished drilling Halifax-1 which flowed at 2.23 MMcfd post-fracing on a constraining choke.
For Beach the Chevron deal vindicates its vision for unconventional gas in the Cooper basin. For Chevron the deal is a chance to enter the Cooper basin and bring in its onshore gas experience in the US.