Buru Energy’s Ungani oilfield is set for a new lease on life following the company’s significant farm-in agreement with Sabre Energy that is designed to spearhead a production restart and continued exploration at the site in Western Australia’s Canning Basin.
Sabre will be able to earn a 70 per cent interest in the Ungani oilfield and control of the operations for a $6 million outlay. It includes an initial $1 million payment to Buru towards the cost of restarting production and $5 million worth of drilling at the Mars exploration well that sists about 9km north of the Ungani production facility.
Buru will remain well-exposed to the project with its 30 per cent working interest in all petroleum production following the restart. It also appears to have a healthy balance sheet going forward, with no debt and $14.8 million in cash and equivalents as at the end of the previous financial quarter.
The Ungani oilfield ceased operations in August last year following the uncertainty over accessibility at the Fitzroy River Crossing where crude oil needed to be transported to the port of Wyndham for international export. Buru’s former joint venture (JV) partner Roc Oil also withdrew from the operation, resulting in a $3.4 million exit payout to the company, allowing it to market Ungani to domestic and international parties.
The marketing process generated plenty of competitive interest, with nine parties undertaking due diligence. Ultimately, Sabre provided the most compelling and value-accretive bid to earn operating rights for the prospective oilfield.
Buru Energy chief executive officer Thomas Nador said: “I look forward to the months ahead as we firm up our plans for a production restart at Ungani and prepare to drill the high-potential Mars prospect as future production backfill for the Ungani facility later this year.”
Sabre Energy managing director Regie Estabillo believed the Canning Basin represented one of the “last frontiers” for onshore oil and gas exploration in Australia.
The Ungani oilfield has produced more than 2.3 million barrels of crude oil since production began in 2012 and sits along the flanks of the Fitzroy trough. The trough is considered most prospective along its flanks and stretches some 600km from west of Broome into the heart of the Kimberley.
Buru has already experienced a considerable amount of exploration success along the trough with its 100 per cent-owned Rafael-1 wet gas discovery in 2021, which led to the potentially game-changing identification of its “Rafael Shallow” prospect through new high-quality 3D last year.
That prospect is a low-cost, low-risk 3D clastic reservoir, less than 1200m from surface. Management plans to fast-track its drilling by using some of Sabre’s $5 million contribution as early as the coming Kimberley operating season.
Sabre is committed to progressing its drilling of the high-confidence Mars prospect at Ungani, which is estimated to hold 2.8 million stock tank barrels (MMstb) of oil. The best estimate for Rafael Shallow is a substantial 19MMstb.
With the combination of a $14.8 million balance sheet and the potential for near-term oil production and multiple value-accretive exploration wells, Buru is positioning itself for an active and eventful end to the year.
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By Andrew Todd
