AWE sells down Bass basin interests

AWE Ltd., Sydney, has sold down its interests in the Bass basin offshore northern Tasmania for $85 million (Aus.) in cash to Indian explorer Prize Petroleum Co. Ltd.

The interests include 11.25% of the BassGas project infrastructure and Yolla gas field in production licence T/L1 along with 9.75% in exploration permit T/18P that contains the Trefoil gas field.

Prize is a wholly owned upstream subsidiary of the major Indian refining and retail combine Hindustan Petroleum Corp. Ltd., which is headquartered in Mumbai.

AWE is to receive $80 million upon completion of the sale. The remaining $5 million will be payable upon meeting two conditions. First, $2.5 million will be paid on completion of the long-running BassGas Mid-Life Enhancement (MLE) project, which includes the drilling of two development wells and installation of gas compression equipment.

The final $2.5 million will be payable if the MLE costs do not exceed an agreed threshold.

Effective date for the sale is July 1, 2013. When completed, AWE will retain 35% in T/L1 and 35% in T/18P.

AWE says the sale will release capital from the BassGas asset and strengthen the company’s financial position as well as reduce its exposure to capital commitments for the final stages of the MLE work.

The deal is subject to the usual approvals from the Australian Foreign Investment Review Board and the Reserve Bank of India.

The BassGas Project is operated by Sydney-based Origin Energy Ltd. The final investment decision to go ahead with the MLE program involving an expenditure of $345 million was made in December 2009.

The project focuses on the Yolla gas-liquids field, which is currently sending gas and liquids by undersea and land pipeline to a processing plant at Lang Lang southeast of Melbourne in Victoria.

The work, still continuing after suffering more than $100 million in cost overruns, involves the drilling of two development wells (Yolla-5 and Yolla-6), the installation of on-platform accommodation as well as additional compression and safety-related facilities. These measures are designed to improve the operating efficiency of the platform and extend the life of the whole project. In particular the accommodation modules will minimize the costlier current use of regular helicopters and increase flexibility for routine work offshore.

Separately the joint venture undertook a major $56 million maintenance campaign at the onshore gas plant and the offshore production platform as well as addressing production constraints experienced in the Yolla-3 and Yolla-4 wells.

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