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Australian Oil Company, Xstate Resources farm out gas prospects in California

Australian Oil Company, Xstate Resources farm out gas prospects in California

Australian Oil Company (ASX:AOC) and Xstate Resources (ASX:XST) have signed a farm-out agreement with Northern Gulf Petroleum (NGP), which will fund drilling of two gas prospects in California’s Sacramento Basin.

The Alvares and Dempsey prospects have gross unrisked best estimate recoverable prospective resources of 2.4 trillion cubic feet (tcf) and 1Tcf of gas respectively.

NGP will earn a 50% interest in the prospects by funding up to US$4.6 million for the Dempsey Exploration and US$10 million for the Alvares Appraisal Prospects.

AOC and Xstate have the option to increase their working interests in these prospects and are expected to have a 30% and 12.5% working interest respectively in each prospect following drilling.

NGP will also subscribe for 13,529,651 shares priced at $0.12 in AOC, or about 15% of the company, to raise about $1.6 million.

AOC will use the proceeds for acquisition of additional working interest in California, including additional working interests in the Dempsey and Alvares Prospects in the Sacramento Basin prior to farm-out, and working capital.

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