Oil Basins, ARC Energy settle legal spat

Tag : basins
The legal battle between Oil Basins Ltd and ARC Energy Ltd has beenresolved, with the Canning Basin joint venture partners agreeing toa new arrangement. Oil Basins had applied for an urgent hearing last month into analleged breach of obligations by ARC, which has merged withAustralian Worldwide Exploration Ltd, over licences in the CanningBasin area. Oil Basins had also attempted to stop the spin-out of Buru EnergyLtd from the merger however that was overruled. Today, Oil Basins said it, ARC and Backreef Oil Ltd have executed adeed of covenant over the transfer of ARC's interest in the CanningBasin licences to Buru. All parties have now entered into a new arrangement that replacesall existing deals. Below is the full announcement: Oil Basins Limited (ASX code OBL) today announces that OBL andBackreef Oil Limited (Backreef) have executed a Deed of Covenant inrespect of the transfer of ARC Energy Limited's (ARC) interests inthe Canning Basin permits L6 and EP129 to Buru Energy Limited(Buru). Buru, OBL and Backreef have subsequently entered into a newagreement (Backreef Agreement) to govern the parties' rights andobligations in respect of the Backreef Area, (which consists ofpart of production licence L6 and permit EP129). The Backreef Agreement replaces all existing arrangements betweenthe parties in respect of the Backreef Area. The key terms of the Backreef Agreement are: - OBL and Backreef will together earn a 100% beneficial interest inthe Backreef Area if they drill the Backreef 1 well by 31 October2010. - OBL will hold 80% and Backreef will hold 20% of the BackreefArea. - OBL or Backreef will operate the Backreef Area (in so far as thissatisfies DoIR requirements) and will be responsible for allapprovals and operational matters, including the drilling of theBackreef 1 well and dealing with DoIR. OBL and Backreef will fullyindemnify Buru against OBL's or Backreef's performance as operator. - If the Backreef 1 well is a discovery, OBL and Backreef willtogether earn a 100% interest in a separate production licence thatwill cover that part of the Backreef Area that contains thediscovery, subject to regulatory approval of the licence. Subjectto the approval of the Department of Industry and Resources, OBLwill hold 80% and Backreef will hold 20% of the production licence. - If the Backreef 1 well is drilled but is not a discovery, thenOBL and Backreef will still earn a 100% beneficial interest in theBackreef Area in the proportions set out above. OBL and Backreefwill hold their interest in the Backreef Area subject to thedrilling of an additional well in the Backreef Area by 31 October2012 or until L6 and EP129 are relinquished by Buru. However, ifBuru intends to relinquish either of L6 or EP129 then Buru mustgive Backreef and OBL 60 days notice of first refusal over therelinquishment. While OBL and Backreef hold their interest in theBackreef Area they may drill additional wells in the Backreef Areaafter the Backreef 1 well. To the extent any one of theseadditional wells is a discovery then OBL and Backreef will earn100% of the resulting production licence. - If the Backreef 1 well is not drilled by 31 October 2010 theBackreef Agreement will terminate and OBL and Backreef will losetheir right to earn any interest in the Backreef Area. - Buru has a right to earn a 30% interest in the Backreef Area bypaying 90% of the costs of the Backreef 1 well, within 90 days ofthe drilling of the Backreef 1 well, in which case Buru will hold30% of the production licence. OBL also advises that all litigation commenced by OBL against ARCin the Supreme Court of Western Australia has been withdrawn andthe relevant parties have entered into a Deed of Release in respectof that litigation. None of the parties have admitted any liabilityin respect of the litigation and each party will bear their owncosts. » Click here to have your say