Canning Basin Royalty Deed – Western Australia

The map below shows the location of all of the royalty interests, including those under the Canning Basin Royalty Deed dated 26 August 2006. Except for R1 and L15, the dark blue areas are under the Lennard Shelf Royalty.

Canning Basin Images

The Canning Basin Royalty has the potential to become an important income producing asset of Fitzroy.

EP 391, EP 431, EP 436, EP 371, EP 428 (2% Royalty) – Buru-Mitsubishi JV

These 5 Permits as shown in the map above are currently held 50% by Buru Energy Ltd (‘Buru’) and 50% by either Diamond Resources (Fitzroy) Pty Ltd (‘DRF’) (EP 391, EP 431 and EP 436), or Diamond Resources (Canning) Pty Ltd (‘DRC’) (EP 371 and EP 428). DRF and DRC are wholly owned subsidiaries of Mitsubishi Corporation (‘Mitsubishi’)). DRF and DRC are currently each responsible, as to 50%, for the obligations and liabilities under the 26 August 2006 ‘Canning Basin Royalty Deed’ relating to these 5 Permits. Mitsubishi has guaranteed to Fitzroy the performance of DRF’s and DRC’s obligations. See the discussion regarding EP 390 below, which has resulted in DRC and Buru having reduced equity (of 25% each) in EP 390.

Ungani Field production – EP 391 (R2) (2% Royalty on 100% participation interest)

Fitzroy continues to closely monitor relevant announcements concerning the Ungani Field that are made by Buru, particularly regarding its development and production plans. Buru announced on 13 December 2013 that oil production from the Ungani Field had recommenced. Crude oil is now trucked from Ungani to a storage facility at the Port of Wyndham.

On 20 January 2015, in relation to the Ungani test program, Buru’s most recent update on Ungani stated:

“The DMP has approved the continuation of the test program at Ungani for a maximum of three months subject to a number of conditions in regard to the format of the testing program….The field is currently shut-in due to recent heavy rains affecting the access road…”

Fitzroy will continues to monitor and wait for further announcements in relation to further exploration on and production from the tenements over which it holds a royalty interest.

STP-PRA-0004 and 0005, the applications for Petroleum Production Licenses in respect of the Ungani Field (lodged in May 2012, and to be carved out of EP 391 as shown in the above map) are still in the assessment stage.

Retention Lease R1 (2% Royalty on 8% participation interest)

Fitzroy continues to monitor activities by the R1 joint venture participants. Fitzroy’s 8% participating interest in R1 was sold together with various other Canning Basin Assets in 2006. R1 is over 3 blocks and renewal number 1 was granted on 8 November 2010. Fitzroy’s 8% royalty rights have been held as against Buru, one of the joint venture participants.

Pursuant to a Deed of Covenant dated 20 December 2013, Buru transferred its 43.28% interest in R1 to Gulliver Productions Pty Ltd (‘Gulliver’, a subsidiary of Key Petroleum Limited) and Indigo Oil Pty Ltd (‘Indigo’) as part of an asset swap and Buru’s ‘ongoing acreage rationalisation program’.

Production Licence L15 (2% Royalty on 12% participation interest)

Fitzroy continues to monitor activities by the L15 joint venture participants. L15 (over 2 blocks) was granted on 1 April 2010 and expires on 31 March 2031. Fitzroy’s 12% royalty rights have been held as against Buru, one of the joint venture participants.
Pursuant to a Deed of Covenant dated 20 December 2013, Buru transferred its 15.5% interest in L15 to Gulliver Productions Pty Ltd (‘Gulliver’, a subsidiary of Key Petroleum Limited) and Indigo Oil Pty Ltd (‘Indigo’) as part of an asset swap and Buru’s ‘ongoing acreage rationalisation program’.

STP-EPA-0045

In October 2011, Buru applied for an Exploration Permit over 25 blocks comprising EPA 0045. On 9 October 2013, Fitzroy advised Buru that if and when it is granted, the EP will be a ‘Replacement Permit’ referable to EP 391 (as it stood in 2006 when sold by Fitzroy) and therefore Fitzroy’s 2% Royalty will apply to it. Buru has advised that its view is that the EP shouldn’t constitute a ‘Replacement Permit’. The EPA remains in the assessment phase.

EP 390 – Apache Farm-in

On 4 November 2013, Buru announced that a subsidiary of Apache Energy Limited will farm-in to a number of permits in the Buru-Mitsubishi joint venture. EP 390, one of the so-called ‘Coastal Permits’ and comprising 20 blocks, was to become 50% held by Apache Onshore Holdings Pty Ltd (‘Apache’) once Apache funded an exploration program on the Coastal Permits during 2014.

The assignment provisions of the Canning Basin Royalty Deed applied to this transaction and a Deed dated 14 March 2014 relating specifically to EP 390 was entered into by Fitzroy with Apache, DRC, Buru and Apache Energy Ltd. Under the Deed, Apache has assumed (as from 12 May 2014, the completion date of the Apache farm-in) the responsibility to pay royalties to Fitzroy as to 50% of the Petroleum recovered from the area of EP 390 (leaving DRC and Buru at 25% each). Apache Energy Ltd has guaranteed the obligations of Apache to Fitzroy. Apache has also acknowledged the Supreme Court proceedings mentioned above and agreed to abide by any binding settlement or final judgment in the Court proceedings.

On 23 December 2014, in its final drilling report in relation to the Commodore 1 Exploration Well on EP 390, Buru stated:

“Although oil shows were noted in cores at several intervals, both inspection of the cores and interpretation of the wireline logs indicates there are no zones with producible hydrocarbons. Consequently the well was plugged and abandoned … Commodore 1 is the first well to be drilled as part of the Apache Onshore Holdings Pty Ltd (Apache) farm out announced in November 2013. The cost of the well will be fully funded by Apache under the terms of the farmout which includes a commitment by Apache to fund a $25 million exploration program on EP 390, 438, 471 and 473…” [Note: Fitzroy has an interest in EP 390 only].

Fitzroy will continue to monitor progress with respect to EP 390.

EP 428, EP 431, EP 371 (R1) and EP 436

Renewal applications for these 4 permits were lodged by Buru in late October 2013. These 4 permits are 4 out of the 5 State Agreement permits (discussed extensively in previous reports by Fitzroy) and are exempt from the requirement to drop 50% of the blocks as part of the renewal application process.

The Laurel Formation accumulations

Buru has identified 2 basin centred gas plays:

  • The Yulleroo Wet Gas Accumulation shown on this map in areas
    • EP 436
    • EP 391
    • EP 428

and

  • The Valhalla Accumulation which is contained in EP 371.