Armour Buys Stake in Gippsland Basin Lease

Armour Energy has announced it has agreed to acquire 50% working interest in Petroleum Retention Lease 2 (PRL2) in Victoria, Australia held by Lakes Oil.

PRL2, located in the onshore Gippsland Basin in Victoria, is considered prospective for both tight and conventional gas accumulations and is in close proximity to existing infrastructure and markets, Armour said in a statement.

Initially, Armour will have 15% working interest in PRL2, subject to using its best endeavours to undertake a $10m work program within 12 months. It can earn an additional 35% working interest, subject to making an election to do so within 2 years and then undertaking a further $40m work program over an indefinite time period. 

According to Armour, numerous wells have been drilled within PRL2 by Lakes Oil in the past and have encountered gas and/or oil.

“Armour Energy holds the view that the presence of gas‐bearing columns in excess of 500 metres thick across seven targeted structures in the Strzelecki Formation indicates potential for early definition of commercial reserves of gas. At the Wombat Field alone, four wells have been drilled and 3C Resources of 628 Bcf of gas (2C 329Bcf) were reported by Lakes Oil in 2010,” the company said.

Due to a moratorium on hydraulic fracturing in Victoria, the Phase 1 program and Armour Energy’s right to carry it out are currently suspended, it said.

“Armour Energy has however sought to engage in discussions with Lakes Oil to revise the terms of the farmin agreement and work program with a view to accelerating commercialisation of the hydrocarbon resources of PRL2,” the company added.

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