Oil and gas company AWE has sold its stake in the Cliff Head offshore oil project to Elixir Petroleum, for an upfront payment of $1 million.
In addition to the upfront payment, Elixir will make further payments subject to revenue milestones, capped at $9 million, to acquire the 57.5 per cent working interest.
Roc Oil, the operator of the Cliff Head (located offshore in the Perth Basin) will retain its 42.5 per cent stake.
Cliff Head is currently producing 1,500 barrels of oil per day, and has produced over 14.5 million barrels since production began in May 2006.
In a statement, Elixir said the project had a 10-year life while any increase in oil price, lowering of production costs or implementation of field life extension projects could extend its life beyond 2026.
“In conjunction with the acquisition, the company will undertake a small capital raise together with a share purchase plan to supplement working capital while Elixir progresses towards completing the acquisition,” Elixir said.
Managing director Dougal Ferguson said it was pleasing to secure a ‘transformational’ acquisition in what has been a challenging year for the company.
“For Elixir to secure an agreement to acquire a material producing asset with a minimal up-front acquisition cost is a testament to the hard work we have put in over the last six-to-nine months in what has been a very difficult environment,” he said.
“This acquisition is totally consistent with our stated objectives of seeking low risk production and appraisal assets and is a first step in the transition of our portfolio from purely exploration to a balanced mix of production, appraisal and exploration opportunities.
“The cash flow that we forecast this asset will deliver together with the significant leverage to oil prices should provide Elixir with the ability to fund other exploration and new business activities, including the Company’s well advanced low cost but high impact Petra Project in Colorado.”
Elixir shares were locked in a trading halt, last trading at 0.1 cent each on Friday.
By Fraser Beattie
