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Onshore Perth Basin farm-in to Cervantes oil prospect

Friday, November 15, 2019

Vintage Energy Ltd (“Vintage”, ASX: VEN) is pleased to announce that it has signed a binding term sheet to farm-in for 30% of the Cervantes oil prospect with Metgasco Ltd (“Metgasco” ASX: MEL, 30%) and RCMA Australia Pty Ltd (“Jade”, 40% and free carry). To give effect to the term sheet, Jade is preparing a farm-out agreement for the Cervantes Joint Venture, with a planned execution date prior to 18 December 2019. The Joint Venture is targeting to spud a well in Q1 FY21 and has an option to drill a second well into a separate prospect. The Cervantes prospect sits within L14, a 39.8 km2 Perth Basin production license granted over the Jingemia oilfield and surrounds. The license is in good standing and not due to expire until June 2025.

The funding for the farm-in (net to Vintage) to acquire a 30% interest in any commercial Permian discovery at Cervantes is as follows:

  • 50% of the well cost; and
  • $200k of evaluation and exploration costs.

The well is expected to cost between $5-7 million (gross), with any well costs above a cap of $8 million (gross) reverting to Vintage’s joint venture equity level of 30%. Vintage will pay Metgasco $100k for future exploration expenditure relating to Cervantes and pay Jade $100k relating to seismic re-processing over the L14 license. The expected timing of estimated costs, net to Vintage, are as follows:

  • FY20 – $1.0 million for long lead items to drill the well and evaluation and exploration costs (as above)
  • FY21 – Up to $2.5 million to drill first well
  • FY22 – Assuming success, $0.9 million for a three kilometre tie-in to Jingemia processing facility and the option to drill second well on similar terms as the first well

Neil Gibbins, Vintage Managing Director, believes that this farm-in is a key step in balancing the Vintage asset portfolio, which is currently predominantly gas focused. “The Cervantes prospect has been selected for inclusion in our growing portfolio due to it being a highly prospective oil target adjacent to facilities and close to market. We have always said that we will seek out appropriate oil assets and the Cervantes prospect fits our strategic criteria perfectly. With the addition of this high-value oil prospect, we are moving toward a well-balanced exploration portfolio consistent with our strategic objectives. Vintage looks forward to working with Jade and Metgasco on progressing this excellent opportunity”

The Cervantes structure is located in a gap between the oil discovery trend of the Hovea, Jingemia and Cliff Head oil fields. These fields, in total, have produced in excess of 27 MMbbl of oil from the key Permian reservoirs in the Perth Basin and lie within an oil fairway around the western and northern section of the basin. The Cervantes structure is a high-side fault trap of multiple Permian reservoir units and shares strong similarities with these oil fields in terms of structure, potential reservoirs and location within the oil fairway on the western flank of the basin.

The Permian reservoir targets in the prospect are the prolific Dongara, Kingia and High Cliff Sandstones yielding a combined gross 2U Best Estimate of 15.3 MMbbl (4.6 MMbbl net to Vintage). Cervantes has a chance of success of 28% and a high chance of development due to its proximity to infrastructure and existing oil and gas fields. The opportunity for rapid conversion of prospective resources to producing reserves exists via a 3rd party oil processing and operations agreement with L14 operator Jade, which owns 100% and operates the nearby Jingemia oil processing and export facility.

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Vintage Energy

Vintage Energy Ltd has been established to acquire, explore and develop energy assets principally within, but not limited to, Australia, to take advantage of a generally favourable energy pricing outlook.

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