Santos Announces Joint Venture Plans with Drillsearch Energy in Cooper Basin

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Researched by Industrial Info Resources Australia (Perth, Australia)--Santos Limited (ASX:STO) (Adelaide, Australia), one of Australia's largest gas companies, recently announced the creation of a joint venture with Drillsearch Energy Limited (ASX:DLS) (Sydney, Australia), a smaller gas exploration and development company.

Under the agreement, Santos will farm-in to permits PEL106A and PEL513, located in the Western Flank of the South Australian Cooper Basin, and will commit to funding a work program valued by Drillsearch at $91.5 million to $182.1 million (AUD$100 million to AUD$200 million). The program will accelerate the commercialization of Drillsearch's earlier wet gas finds.

The Cooper Basin is one of Australia's most prolific oil and gas basins, having been discovered in the mid-1960's. The Santos-owned Moomba Production Facility has processed oil and gas in the region since the early 1970s. It is now connected to Adelaide and Brisbane by gas transmission pipelines, and to Sydney by an oil pipeline.

James Baulderstone, Santos' vice president for Eastern Australia, said that this agreement provided Santos with liquids-rich permits with excellent near-term potential, and that its agreement with Drillsearch demonstrated the company's continued focus on developing and supplying additional gas into the Eastern Australian market for 2014.

"We are in the process of upgrading Moomba so that it can continue its nearly 50-year role as a pivotal hub for gas in Australia," Baulderstone said. "Santos' investment in Moomba is the key that will unlock the value of fields such as these in the future."

Drillsearch focuses on brownfield exploration, citing a lower geological risk and access to existing infrastructure. Commenting on the agreement, Drillsearch Managing Director Brad Lingo said: "We are delighted to be entering into this series of important transactions with Santos. Santos has long been regarded as the pre-eminent Cooper Basin Operator, and for several years Drillsearch and Santos have enjoyed a strong and constructive relationship. These transactions are a testament to our good working relations with Santos."

In addition to the farm-in on the exploration permits, Santos and Drillseach have entered into a long-term gas sales agreement (GSA) covering expected production from PEL 106A and PEL 513 through to 2025.

In addition to a financial commitment, Santos will divest a 29% interest in ATP 299 and the associated production licenses to Drillsearch, which is already a joint-venture partner with Santos in that permit.

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