Joint venture partners Pilot Energy and Triangle Energy have struck a revised vendor finance agreement to secure Pilot’s full ownership of their Cliff Head oil joint venture and its associated infrastructure, reopening the door to Pilot’s ambitions for its Arrowhead carbon capture project in WA’s Mid West region.
Under the $5.6 million plus interest deal, Pilot will buy Triangle out of the offshore, fully depleted Cliff Head oil well to repurpose it as a carbon storage facility.
Triangle has agreed to defer receipt of a cash payment for the sale assets until later next year, to give Pilot time to secure the required funding.
Pilot’s long-term ambition is to store liquified carbon emissions from WA’s big industrial emitters and to eventually store its emissions through a clean ammonia production process.
Pilot and Triangle’s updated vendor finance deal sets out a new two-stage asset transfer structure. Pilot will first acquire the joint venture’s WA onshore assets, followed by Cliff Head’s offshore assets pending a regulatory sign-off from the National Offshore Petroleum Titles Administrator (NOPTA).
Pilot will use a vendor financing arrangement to buy Arrowhead’s onshore facilities and infrastructure licences. The company will issue Triangle a secured promissory note valued at about $5.56 million, which will carry a 10 per cent interest rate capitalised until its maturity at the end of the September quarter next year - or earlier in the event of a sale of a significant stake in the Cliff Head project.
Triangle Energy managing director Conrad Todd said: “The revised timetable is in the best interests of both companies. It provides Pilot sufficient time to secure the funds needed to complete the transactions while ensuring that Triangle ultimately receives the same price plus interest and incurs no operating costs with respect to Cliff Head. This means Triangle will still achieve its key objectives, including enabling it to focus solely on its growing conventional oil and gas exploration and development interests”.
Pilot requires NOPTA approval to complete the transfer of the Cliff Head offshore assets under Commonwealth jurisdiction, however, the transfer of all the WA onshore assets is not burdened. The company says the transfer will let it begin the transition of the facilities and give it the flexibility to sell down future ownership interests to incoming joint venture parties to pay off the acquisition.
Pilot has committed to continuing its funding of the full operating costs associated with the Cliff Head facilities, as the company progresses it plans to transition the site from oil production to carbon dioxide storage under its flagship Mid West Clean Energy Project.
The existing headline terms of the transaction remain intact, including a $4M milestone payment to Triangle upon the award of a greenhouse gas injection licence and a 2 per cent royalty on third-party revenues from the Cliff Head Carbon Storage Project, capped at $7.5M.
Pilot Energy executive chairman Brad Lingo said: “Reaching these revised terms is a positive development as it enables Pilot to acquire a 100% interest in the Cliff Head oil field joint venture and associated operating assets. Under these revised terms Pilot can continue progressing the proposed Cliff Head carbon storage project, which is a key component of the broader Mid West Clean Energy Project.”
Pilot recently laid out a project development agreement with a consortium of South Korean mega-energy firms led by Korea Southern Power Co to jointly develop the Mid West Clean Energy Project and secure a supply of clean ammonia.
The consortium is well-funded by government initiatives targeting the ammonia supply for use in hydrogen co-firing in coal-fired power plants in Korea.
Pilot is also assessing how the facilities may be used to support additional productive operations and confirmed it is set to begin execution of a grant-funded carbon capture and water processing pilot project with technology partner Capture 6.
The updated agreement with Triangle marks the latest step in Pilot’s transformation into a carbon management and clean energy producer. The company is now a step closer to creating Australia’s first offshore carbon dioxide storage project, which would also establish a domestic supply of clean ammonia for export to Asia-Pacific clean energy markets.
With the revised terms in place and a clarified regulatory pathway, Pilot now has the flexibility to capitalise on its strategic infrastructure and existing partnerships in South Korea as it broadens its role in WA’s low-emissions future.
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