88 Energy buys out its partner on Project Peregrine

88 Energy Limited (LON:88E) has agreed to buy out its partner on Project Peregrine in Alaska. The company has entered into an agreement with Alaska Peregrine Development Company (APDC) that will enable the continuation of the exploration programme at Project Peregrine next winter; APDC had been mulling a pause in the exploration programme to pore over the results from the Merlin-1 well. READ 88 Energy sets out timelines for Merlin-1 analysis APDC will sell 88 Energy a 50% working interest in the project, giving the London-listed company a 100% working interest in the project. The agreement does not include the neighbouring Umiat oil field. 88 Energy will pay US$14mln to APDC, payable in new 88 Energy shares, issued in several tranches. The first tranche of 235mln shares at A$0.022 a share has already been issued to APDC. 88 Energy will also pay US$10mln in cash on the achievement of gross 2P (proved + probable) reserves of 100mln barrels within 36 months, plus cash payments of US$2.5mln per 50mln barrels on the achievement of gross 2P reserves added over 100 million barrels within 36 months (capped at five additional cash payments). APDC will also retain a 1.5% overriding royalty interest on future production from the Project Peregrine licences and will receive 10% of the gross sale proceeds in respect of an assignment of greater than 49% of Project Peregrine within 24 months, excluding a bona fide farm-out. APDC will remain liable for all outstanding cash calls in relation to Merlin-1 and will have contributed a total of US$20 million towards the project at completion. APDC said it was unlikely to be able to meet future funding requirements for the project and that it was selling out because it did not want to hold up work on the project. "This is an excellent outcome for our shareholders as we now have full control of the project, including the possibility of further farm-out to a new partner with greater technical and operational capability, ahead of future planned drilling and exploration activity. With the additional data we now have in hand, the potential for improved transaction metrics has increased. We also remain optimistic about the future results from the ongoing laboratory tests related to the Merlin-1 well,” said Ashley Gilbert, the managing director of 88 Energy. “APDC has been a good partner and we thank them for their contribution but ultimately it was deemed in the best interests of both parties for 88 Energy to consolidate its interest in the project creating the best opportunity to maximise value for all stakeholders. Having 100% working interest in both Project Peregrine and the neighbouring Umiat Oil Field, opens up significant potential for the company to realise value in the region,” Gilbert said.