26/10/2018 - 15:12

Whitebark in $5m Xanadu sale

26/10/2018 - 15:12

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A sluggish approvals process for seismic work at the Xanadu prospect in the Perth Basin has led Whitebark Energy to sell its stake in the project in a $5 million deal, with the money to head to Canada instead.

Whitebark in $5m Xanadu sale
Triangle's Cliff Head platform is located near the Xanadu prospect. Photo: Triangle Energy

A sluggish approvals process for seismic work at the Xanadu prospect in the Perth Basin has led Whitebark Energy to sell its stake in the project in a $5 million deal, with the money to head to Canada instead.

Whitebark, formerly known as Transerv Energy, holds a 15 per cent interest in the Xanadu prospect, located about a kilometre offshore near Arrowsmith.

The field is close enough to the coast that it can be drilled from onshore, however.

The stake will be sold to Triangle Energy, which already has a 30 per cent share of Xanadu.

The deal includes $2 million of cash upfront, a $1 million share issue, and a further $1 million in cash and shares once the field is verified to contain more than 8 million barrels of oil in reserves.

Finally, Triangle will pay a $1 million bonus fee to Whitebark once the field has produce 1,000 barrels of oil.

Whitebark chief executive David Messina said the cash could much more easily be invested in the company’s Canadian operations, where costs were much lower and approvals much quicker.

It follows Xanadu operator Norwest Energy revealing a delay in approvals at the project earlier this month.

Norwest Energy chief executive Shelley Robertson told Business News at the time that seismic work would not get under way until at least March next year.

Ms Robertson said the process involved a lot of stakeholder consultation and cross-departmental discussions.

“We have to over-engineer our approvals,” she said

“An approval for seismic, a few years ago that might have been 100 pages long, now its 400-500.”

One issue was that documents would go back and forth between proponents and the department for changes, with a lack of clarity when something might actually be approved.

In that case, the department might hit its performance target for responding to an application within a certain timeframe, yet a project may be indefinitely delayed.

Whitebark’s Mr Messina said companies would need to have capital tied up for seismic and drilling work once an approval was ticked off, which was difficult to maintain if it was unclear when that would be.

“When you can’t make accurate predictions as to when that capital may be required, that actually means it becomes lazy capital,” he said.

“To have it sitting around and not be able to predict when it may be required is just not good use of funds.”

By contrast, deploying that capital in Canada would enable drilling of a couple of wells within a few months, Mr Messina said.

Whitebark remains owner of the Warro unconventional gas project in the Perth Basin.

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