Under the agreement, Magellan will pay Santos time-staged cash consideration equal to AUD100m for its interest in Evans Shoal. It will also pay additional contingent payments to Santos of AUD50m upon a favorable partner vote on any final investment decision to develop Evans Shoal and AUD50m upon stabilized gas production from NT/P 48.
Closing and completion of the purchase is subject to regulatory and other approvals, and is expected to occur in the second half of 2010.
Evans Shoal is a large, yet to be developed natural gas field with previously estimated contingent gas resource in excess of 6.6 trillion cubic feet, including CO2 content. This resource is dependent upon completion, submission, and approval of a development plan and upon further drilling, which Magellan believes will support the field’s potential.
The field has had a complete 3D seismic program covering 2,150sqkm within the permit. Seismic analysis has confirmed the field’s structural closure to cover in excess of 320sqkm.
William Hastings, president and CEO of Magellan, said: “Clearly, this is a major step for Magellan. The Evans Shoal field is unique in its fit with our strategies and plans, its low cost development potential relative to other major projects, and its sheer size.
“We have top-tier co-owners in this project and we look forward to working with them on a near-term, timely development plan, coordinated with the Australian government. We are also currently working toward new equity financing options; the first segment of the transaction is settled with cash.”
Evans Shoal was first discovered in 1988. It lies in a range of water depths from very shallow (less than 3ft) to more than 300ft and has had three wells drilled. Subsequent drill stem testing flowed gas at a stabilized rate of 25 million cubic feet per day. The field contains a substantive quantity of CO2.
As part of the transaction, Magellan is expected to seek to replace Santos as the operator of Evans Shoal under the joint operating agreement. The company will work with the co-owners to achieve consensus and implement a development plan that builds value. Co-owners in the joint operating agreement for Evans Shoal are Petronas Carigali (25%), Shell Development (25%) and Osaka Gas Australia (10%).
