DENVER, May 30, 2012 /PRNewswire/ -- Magellan Petroleum Corporation (NASDAQ: MPET), which focuses on exploring and maximizing the potential of its oil and gas assets in the United States, Australia, and the United Kingdom, today announced the completion of its previously announced Australian asset swap with Santos Ltd. Under the terms of the agreement, Magellan has:
- Received A$25 million in net cash proceeds and expects to receive post-closing adjustments in an additional amount of approximately A$3 million within the next sixty days from Santos;
- Increased ownership to 100% in the Palm Valley and Dingo natural gas fields;
- Sold all of its interests in the Mereenie oil and natural gas field to Santos;
- Executed a 17-year gas sales contract with Santos for the sale of natural gas production in an amount of up to 23 Bcf from the Palm Valley field, which production volumes have in turn been sold by Santos to a sizeable mining customer in Australia; and
- Retained the opportunity to earn up to A$17.5 million in bonus payments based on Mereenie achieving certain production milestones over the next 20 years.
As a result of the transaction's completion, Magellan's consolidated cash position has increased to approximately US$45 million, including expected post-closing adjustments. In addition, the 17-year contract for all of the currently existing Palm Valley field production is expected to increase Magellan's total reported proved reserves by approximately 18 Bcf of natural gas (3 MMboe) as well as to generate approximately A$100 million in cumulative undiscounted revenue. The Company will now focus on marketing Dingo's natural gas resources to the Australian mining industry. The Company will also undertake a review of Palm Valley in an attempt to determine if there exist additional undeveloped reserves in this field.
"Completing our asset swap transaction with Santos is a transformational milestone for Magellan Petroleum and illustrates the continued execution of our turnaround strategy set in place last year," said Tom Wilson, President and CEO of Magellan. "In addition to enhancing a very strong balance sheet, the transaction completes our Australian asset rationalization effort and provides our company with a long term, stable cash flow resource with more operational and cost control. At the same time, a potential for upside from our Australian assets has been created based on the Mereenie field achieving certain production milestones, the development of our Dingo asset, and, longer-term, the results of the upcoming seismic survey of our Bonaparte Basin asset.""The Australian mining industry is seeking alternatives to the costly diesel oil currently used in most mining operations," continued Mr. Wilson. "Palm Valley's proximity to mining operations enabled Santos to enter into a long-term supply agreement and illustrates the current attractiveness of the Australian market for natural gas. Our goal is to directly enter into a similar agreement with a blue-chip mining customer for Dingo's natural gas resources, and we are actively pursuing such negotiations."