Buru Energy (ASX: BRU) has locked in a local drilling company to drill two oil wells in Western Australia’s onshore Canning Basin that form the centrepiece of the company’s farm-in joint venture (JV) with Sabre Energy.
The campaign is set to test the promising Rafael Shallow and Mars exploration wells and binding drill rig hire agreements are to be executed shortly to enable drilling to kick off in September-October.
Buru revealed yesterday that it had executed the farm-in agreement with Sabre, which has committed to spending $6 million in drilling and testing costs at the former’s Rafael Shallow oil well to earn 50 per cent of any commercial discovery and production.
As part of the new farm-in deal, if a commercial discovery is made, Sabre
will compensate Buru for previous exploration expenses at Rafael with a further payment of $1.5 million.
The latter has today confirmed it has signed a letter-of-intent with Silver City Drilling (SCD) for the provision of “Rig 24” to undertake exploration at the two wells during this year’s Kimberley operating season.
A new oil discovery will provide an additional funding path for Buru’s 100 per cent-owned Rafael Deep Phase 1 gas and condensate project, which remains the Company’s development priority for that existing resource.
Buru Energy CEO Thomas Nador
Silver City Drilling director Viv Oldfield says he is optimistic that drilling success in the upcoming wells will lead to renewed interest in exploratory drilling.
Buru says drilling will also be conducted by SCD at the Mars prospect, which is part of the Ungani oilfield that is also under a JV executed by the two partners earlier this year.
When the value in the Rafael permit area became obvious to management, it undertook a marketing campaign to invite interested parties to submit bids for the rights to drill. The association between the two companies that began with the Ungani JV assisted
Sabre in being chosen as the preferred partner for the latest Rafael JV agreement.
Additionally, as part of the new arrangement, any costs incurred on the farm-in exceeding $6 million are to be paid by the parties in accordance with their respective JV participating interests.
Buru has also granted Sabre a time-limited right of first refusal to acquire an interest in the underlying permit that contains the Rafael deep phase-one gas and condensate project, with a view to also joining that venture and to acquire additional exploration scope on the back of drilling Rafael Shallow.
The 100 per cent-owned Rafael phase-one gas and condensate project that sits at significantly greater depth, is Buru’s top priority for the Rafael site.
With Sabre bankrolling the Rafael Shallow drill program, in addition to further testing taking place at the Mars prospect, Buru will be keenly watching for any “black-gold” discovery that can help provide a funding boost to its fully-owned phase-one gas and condensate project … and give it a kick along the development path.
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