COTT Oil & Gas has withdrawn from an exploration licence in Papua New Guinea so it can focus its attention on commercialising its Pandora gas field.
The aspiring Perth-based gas producer released a statement in October saying that it had reached an agreement with Kina Petroleum and Heritage Oil to surrender its interest in PPL 437 in exchange for an undertaking that Cott will not be required to meet further contributions to joint venture expenditure.
Cott presently holds a 20 per cent interest in PPL 437 in joint venture with Kina, and Heritage is earning an interest in the permit through a farm‐in arrangement with Kina.
The undertaking relating to joint venture expenditure applies to both past and future financial commitments, and includes cash calls to date relating to the recently completed seismic program, that Cott would otherwise be required to meet.
Cott believes that the terms of the agreement under which it is withdrawing from PPL 437 are favourable, particularly in light of the work commitments expected during the remainder of the license period.
In December last year, Cott announced it had entered into an agreement with International Exploration Services (IES) to provide IES with certain rights in the event of Cott commercialising up to 25 percentage points of PRL 38.
Under the agreement, if Cott commercialises part or all of its interest in PRL 38, IES will be entitled to receive value up to a maximum of US$1 million per percentage point less any costs from the sale of up to 25 percentage points of the license.
Following the recent sale of Kina shares and Cott’s withdrawal from PPL 437, the company has elected to pay IES A$1.66 million in return for reducing IES’s commercialisation rights to 23.3 percentage points of the License.
Cott retains a 40% interest in PRL38, and IES’s rights apply only in the event of a transaction that commercialises Cott’s interest in the License.
“Our withdrawal from PPL 437 on favourable terms provides Cott with the opportunity to focus on PRL 38 [Pandora] where we believe there is a significant opportunity to achieve a positive outcome for Cott shareholders,” Cott managing director Andrew Dimsey said.
“The agreement to reduce IES’s commercialisation rights over PRL 38 is consistent with this strategy.”