15/01/2013 - 11:29

Fortescue terminates energy sector entry

15/01/2013 - 11:29

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Fortescue terminates energy sector entry

Fortescue Metals Group has terminated its entry into the oil and gas industry, ending discussions with Oil Basins over an onshore shale project within the Canning Basin.

Melbourne-based Oil Basins said talks with Fortescue yesterday had resulted in an agreed letter of intent being terminated, despite non-binding documents having been signed off on after the deal was first announced in November.

Under the deal, Fortescue was to become a cornerstone investor in Oil Basins with an 18 per cent shareholding – achieved through a private placement of shares valued at $4.2 million plus options – and was offered a 25 per cent interest through a priority farm-in arrangement in the exploration permit 507/8-EP, otherwise known as the Derby Block.

The deal - which came two months after Fortescue announced it would pause its iron ore expansion plans in the Pilbara - marked the first time the miner was entering the energy sector and the first investment outside of its core business.  

Oil Basins today said Fortescue remained interested in a direct, part acquisition of the Derby Block, subsequent to grant, with a formal determination by the National Native Title Tribunal later this month.

Oil Basins added while it was disappointed with Fortescue’s decision not to proceed, it was “fielding serious third party interest from an oil and gas exploration company in a similar transaction which may include a participation in a proposed placement”.

“[Oil Basins] has received renewed expressions of interest from oil and gas supermajors for a farm-in to the Derby Block should [it] attain 100% of the permit,” said the company, which currently holds a 50 per cent interest in the permit.  

Fortescue last month announced it would restart its iron ore expansion plans in the Pilbara after it paused plans in September.  The miner is aiming to achieve an annual production rate of 155 million tonnes by the end of this calendar year.

Shares in Oil Basins are still in a trading halt, having last traded at 3.4c, while shares in Fortescue shed 8c to $4.65 at 1059 AWST. 

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