InterOil, Total strike Elk-Antelope farmout deal in Papua New Guinea

InterOil Corp. has made a billion-dollar joint venture deal with France’s Total SA for the development of its gas reserves in the Elk and Antelope fields onshore Papua New Guinea.

InterOil will sell Total a gross 61.3% interest in petroleum retention lease 15 (PRL15), which contains the two fields in Papua New Guinea’s Gulf Province.

Total also will have exclusive rights to negotiate a farm-in to all InterOil’s exploration licences in Papua New Guinea.

The two companies have agreed a final transaction price of $1.5-3.6 billion for 5.4-9 tcf of natural gas equivalent. Payments will be based on appraisal drilling and reserves certification.

Agreements covering the purchase of PRL15 interests, the proposed LNG project and exploration farm-in rights were signed Dec. 6 in Port Moresby by Michael Hession, InterOil chief executive officer, and Jean-Marie Guillermou, Total Asia-Pacific exploration and production senior vice-president.

Fixed payments to InterOil are made up of $613 million on completion of the transaction expected during first-quarter 2014; $112 million on the occurrence of a final investment decision for a new LNG plant; and $100 million at first LNG cargo from the facility.

Total also agreed to pay $100 million/tcfe for volumes more than 1 tcfe for additional resources discovered within the retention lease from one exploration well. Payment would be made at its first gas from the proposed Elk-Antelope LNG facility.

In addition Total will carry the cost of drilling the appraisal well program and lead construction and operation of the proposed LNG project.

InterOil will continue to operate all its exploration leases in the country.

InterOil will use funds from the transaction to retire debt, exploration and appraisal activities, and to fund the company’s 30% share of the Elk-Antelope project development.

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