New Guinea Energy (ASX: NGE) has banked in US$15 million (A$14.2 million) from the sale of PPL 277 in Papua New Guinea to ExxonMobil (NYSE: XOM) and Oil Search (ASX: OSH) to finance its exploration activity.
Importantly, it ties part of the company's growth to the expansion of the ExxonMobil-led PNG LNG liquefied natural gas project by providing a source of ongoing revenue in the event of commercial development.
Chief executive officer Grant Worner said the sale strengthened New Guinea's balance sheet while retaining exposure to the upside potential.
The company is entitled to a US$20 million payment if a Petroleum Development Licence is granted from the original PPL 277 area and will also receive a royalty over all revenue if commercial production occurs.
This could be worth between US$48 million and US$312 million to New Guinea depending on discovery of petroleum and its size, commercial viability of any development, as well as other factors.
Both ExxonMobil and Oil Search will each hold 50% in PPL 277.
PPL 227 is located next to PRL 11 and PDL 8, which holds the Angore gas field, and is also close to PNG LNG infrastructure.
While Exxon and Oil Search's Trapia-1 well on the border of PPL 277 and PRL 11 did not intersect any prospective reservoir intervals, the permit itself contains 13 leads with oil and gas condensate potential.
Hydrocarbon seeps have also being noted at one of the leads and there is excellent access to the central area along Kutubu Road.
New Guinea plans to carry out surveys and seismic over its 100% owned PPL 265, PPL 266 and PPL 267 to identify drillable targets and de-risk exploration activities.
This is aimed at replicating its success with selling PPL 277 and farming out stakes in PPL 268 and PPL 269 toTalisman Energy (TSE: TLM).
It will also fund activities with Talisman and Mitsubishi Corporation on the latter two permits and seek diversification of its portfolio by acquiring near term operational assets.
The completion of the PPL 277 sale proves up New Guinea's strategy of de-risking exploration permits before farming out interests or selling them.
It also validates the value of the company's acreage and provides New Guinea with the cash to carry out exploration elsewhere in Papua New Guinea.
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