Clontarf buys 10pc of Western Australia offshore gas prospect

Oil and gas explorer Clontarf Energy announced the acquisition of a 10% interest in the “high-impact” multi-trillion cubic feet Sasanof offshore exploration prospect in Western Australia on Monday, for an initial $4m (£3.23m) cash and 100 million shares.

The AIM-traded firm said the acquisition was taking place through the purchase of a 10% interest in the Western Gas operating vehicle that owns the prospect, and has plans to drill the main target horizon at the Sasanof-1 Well during May and June.

It said consideration would consist of $4m in cash and 100 million ordinary shares, valued at £0.48m at the cose on 6 May.

In the event of a discovery being declared at the Sasanof-1 Well, the consideration would be further increased by 150 million shares, up to a maximum of £8.7m, being 80% of the 6 May market capitalisation.

Clontarf described Sasanof as a “large, seismically-defined, amplitude-supported prospect” in the Cretaceous Lower Barrow Group at a depth of 2,500 metres.

It is an up-dip prospect from the liquids-rich Mentorc Gas Field, previously discovered by Hess Corporation.

Operator Western Gas secured the Valaris MS-1 semi-submersible drill rig, with drilling scheduled for May and June at an estimated cost of about $20m, of which Clontarf would fund $4m.

In the event that the costs for the well overran, Clontarf would be responsible for 20% of a further $5m.

After that, costs would be paid for on a pro-rata basis, meaning Clontarf would need to contribute 10%.

Any such further contributions from Clontarf would be made as a loan, to be repaid from proceeds from any future production or the sale of the asset.

The 10% interest was being acquired from Western Gas, which would hold 52.5% of the prospect following the acquisition.

Clontarf said the other partners in the licence included Global Oil and Gas Limited at 25%, and Prominence Energy at 12.5%.

The acquisition was being funded from the group's existing cash balance, following its raise of £3.5m in April.

“There has rarely been a better opportunity to explore large potential gas prospects in a safe jurisdiction,” said chairman David Horgan.

“International gas prices have soared since late 2021 - especially in Europe and Asia.

“This is partly due to geopolitical issues, though an underlying concern is the tightening supply/demand balance.”

Horgan said under-investment in new gas developments since 2014, exacerbated by the Covid-19 pandemic, had left key markets under-supplied as gas demand recovered.

“Investment in intermittent renewables generation requires back-up from reliable generators, of which gas-fired turbines are the most flexible and efficient.

“This supply constraint is particularly tight in Australia's North-West Shelf, where several expanding liquefied natural gas export facilities urgently need new gas reserves.

“LNG is now over half of global traded gas sales, and a third of European consumption, which will grow as buyers seek to diversify from dependence on Russian gas.”

Meanwhile, David Horgan noted that the Asian market, which takes 70% of global LNG deliveries, was also “surging” with economic recovery post-pandemic.

“An added attraction is Western Australia's clear legal title, political stability and pro-extractive industry policies.

“The multi-trillion cubic feet Sasanof drilling offers a rare opportunity for ambitious gas explorers.”

At 1319 BST, shares in Clontarf Energy were down 3.85% at 0.46p.