Carnarvon Petroleum's (ASX: CVN) shares are expected to lift following the company entering into new agreements with Apache Northwest Pty Ltd which secure additional funding for drilling activities on its highly prospective North West Shelf permits.
The well cost cap increased from $50 million to $70 million (gross cost per well) to drill Phoenix South-1 well and the contingent Roc well.
Apache is to assume operatorship upon exercising option to acquire 40% interest in WA-436-P and WA-438-P.
Carnarvon is now fully funded for drilling Phoenix South-1 and Roc wells.
Carnarvon retains its 20% interest in the wells, which are contained within WA-435-P and WA-437-P respectively.
Carnarvon and Finder Exploration Pty Ltd will grant Apache an option to acquire a 40% interest in WA-436-P and WA-438-P (20% from Carnarvon and 20% from Finder), for a nominal consideration to be exercised on or before 3 July 2014.
Upon exercising the option, Apache will assume operatorship of these permits and Carnarvon will hold a 30% interest in each of WA-436-P and WA-438-P.
Adrian Cook, managing director and chief executive officer for Carnarvon commented:
"This transaction, in conjunction with the recently completed Entitlement Offer, enables Carnarvon to be fully funded through the Phoenix South-1 and Roc wells and if Apache exercises the option, will secure a world class operator across these four contiguous permits.
"In addition to drawing forward value to the more immediate Phoenix South-1 well and the contingent Roc well, the transaction creates the platform to commercialise the value of the Company's North West Shelf acreage and create increased value for shareholders.
"In the event of success at Phoenix South-1 well, we anticipate this increase will be significant."
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