PERTH (miningweekly.com) – ASX-listed Central Petroleum will acquire a 50% interest in the Mereenie oil and gas field, in the Northern Territory, for A$45-million.

Under the terms of the agreement, Central would also free-carry Santos under a A$10-million works programme prior to the development of the proposed Northern Territory-East Coast gas pipeline (NEGI). The work was aimed to increase the 2P reserve at Mereenie to 280 PJ.

Conditional on the NEGI pipeline proceeding, Central would also pay Santos a A$15-million bonus payment, and had committed to free-carry the major to a A$55-million to A$75-million NEGI work programme to develop the Mereenie field for production into the NEGI pipeline.

Central MD Richard Cottee told shareholders that the transaction enabled the two companies to efficiently expand the low-cost conventional gas supply from the Amadeus basin to the eastern seaboard domestic market within four years, and made Central a significant producer in its own right.

By taking ownership of the Mereenie project, Central would become the common operator across all three conventional gas fields producing in the Amadeus basin, which Cottee said delivered immediate operating efficiencies and provided employment opportunities in and around Alice Springs.

The acquisition was expected to increase Central’s oil production to over 500 bbl/d, and contracted gas sales to over 4 PJ/y.

Cottee noted that financing for the transaction would be obtained through a credit-approved increase in the existing Palm Valley and Dingo debt facility with Macquarie Bank.

Under the expanded debt facility, the interest rate would be reduced relative to the existing loan by 170 basis points, and Central would cancel the 15-million options previously issued to Macquarie, and issue 15-million new options with the same terms, should the full debt facility of A$90-million be drawn.

Cottee said that should the NEGI project proceed, Central would have substantial new revenue generation through new bankable gas sales agreements to allow NEGI funding to be covered by conventional bank debt.