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Falcon Oil & Gas extends deadline to acquire royalties over Beetaloo project

Falcon will be able to make a decision over the royalty acquisition after the next phase of work, due to start in June
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It has until August 2021 to exercise its option

Falcon Oil & Gas Ltd (LON:FOG) (CVE:FO) told investors on Tuesday that it has extended its deal to acquire royalties over the Beetaloo basin assets in Australia's Northern Territory.

In a statement, the company detailed that it has secured two additional years to pick up additional royalties (overriding royalty interest – or ORRI) following a prior deal struck in 2013.

At that time, Falcon agreed to acquire the majority of the royalties – it bought a 5% royalty from TOG Group, which had held a total royalty of 8%, and the company had the option to buy another 2%.

READ: Falcon Oil & Gas eyes June start to new drill campaign

The first transaction came when Falcon completed its separate farm-out transaction with Origin Energy, while a decision over the additional 2% was delayed amid the Northern Territory’s fracking moratorium, which began in 2014 and ended in 2018.

With a further two-year extension now agreed, the company has the ability to gain further insights from the shale project before executing a deal.

“Falcon had originally envisaged the call option decision would follow the completion of the Beetaloo work programme,” said Philip O’Quigley, Falcon's CEO.

“In consideration of the delays to the work programme due to the moratorium on hydraulic fracture stimulation in the Northern Territory, this two-year Extension enables Falcon to further progress the Beetaloo work program, allowing Falcon make a more informed decision with the additional work completed while providing greater financial flexibility over the next couple of years,” he added.

The new terms of the deal allow Falcon to exercise its 30% share of the call option - proportionate to its stake in the project since the Origin farm-out - up until 31 August 2021.

The transaction cost in the deal will now be US$7.5mln, increased from US$4.5mln, and, it is to pay a US$500,000 extension fee to TOG.

In a note to clients, analysts at SPAngel commented: “Today's update, while representing a significant increase in the cost relative to the original option terms, is a reflection of the progress that has been made over the project in the intervening period and the significant derisking in the Beetaloo Basin's commercial potential.”

In afternoon trading, shares in Falcon O&G held steady at 16.75p.

 -- Adds analyst comment, share price --

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