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DGR Global to farm in to prospective onshore Gippsland and Otway tenements with Lakes Oil deal

DGR Global’s (ASX: DGR) 50% owned gas subsidiary Armour Energy has reached a share placement and farm-in agreement with Lakes Oil (ASX: LKO) to subscribe to A$2.25 million in Lakes Oil shares and farm-in to highly prospective onshore Gippsland and Otway basin tenements.

Armour Energy will purchase 900 million shares at $0.25 per share, providing the company with a 15% interest in Lakes Oil.

The DGR subsidiary will also have the right to earn up to a 51% interest and assume operatorship of the PEP169 tenement in the Otway Basin and PEP166 tenement within the onshore Gippsland Basin.

To earn its Otway Basin interest, Armour Energy will drill and complete a $2.5 million well in the Moreys Prospect targeting a P50 recoverable prospective resource of 46 billion cubic feet of gas in the Waarre Sandstone.

The Moreys Prospect is adjacent to numerous gas fields operated by Origin Energy and proximal to existing pipeline infrastructure.

To earn its Gippsland Basin interest, Armour Energy will spend $9 million over two years targeting large unconventional gas reserves.

The company will expend $4.25 million during the first year of the agreement to drill the planned Holgate 1 Well on the Baragwanath Anticline, along with a second cored hole on the Yallourn‐Morwell Anticline to earn a 25% interest in PEP166.

This will be followed by a further $4.75 million spend in the second year to complete the 51% interest and assume operatorship of PEP166.

Further, Armour Energy will have an option to acquire half of Lakes Oil’s interest in the Trifon and Gangell blocks within PRL2 and a 25% interest in the balance of PRL2 at any time in the next three years for a consideration of $30 million and staged option fees totalling $600,000.

Commenting on the Lakes Oil agreement, Armour executive chairman and DGR Global chief executive officer Nicholas Mather said, “Growing global demand for gas, Australian support for gas development and the rapid development of efficient unconventional extraction technologies bode well for the emergence of Armour as a gas company of national significance.”

Armour Energy’s program in the Lakes Oil project areas will begin at the end of March 2012.

Director Appointments

Armour Energy directors, executive chairman Nicholas Mather and chief executive officer Phil McNamara, or another nominee of Armour Energy, will be appointed to the Lakes Oil Board.

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DGR Global was formerly known as D’Aguilar Gold but changed its name as part of a strategy to form a world class resources company with interests across the globe.

DGR is moving ahead with its planned IPO of Armour Energy and expects the company to be trading on the ASX by February next year.

Armour Energy is exploring a new gas province in the Northern Territory, with the aim to deliver gas to both Queensland’s Northern Economic Triangle and the Northern Territory.
Over 118,814 square kilometres of land area is currently under application, including the McArthur, South Nicholson and Georgina Basins.