Carnarvon Petroleum has entered into a farm-out deal with UK-based Advance Energy under which the latter will acquire up to a 50% stake in the Buffalo Redevelopment Project in the Timor Sea.

According to the Australia-based Carnarvon Petroleum, the deal will enable the redevelopment of the Buffalo oil field located in the Bonaparte Basin, offshore Timor-Leste.

As per the terms of the farm-out deal, Advance Energy has to fund up to $20m for the drilling of Buffalo-10 well in order to earn the 50% stake.

Additionally, the newly created joint venture between the two parties will acquire development funding from third party lenders, while any additional funding requirements will be provided by the UK oil and gas company as an interest free loan.

Carnarvon Petroleum will continue as the operator of the Buffalo Redevelopment Project. Currently, the company is carrying out a tender process to award a contract to a drilling management services company to help it in the drilling of the Buffalo-10 well.

The oil and gas company aims to commence the drilling operations in late 2021.

Carnarvon Petroleum managing director and CEO Adrian Cook said: “The Buffalo redevelopment opportunity is well placed to succeed given its known production capability and low development cost and will be greatly enhanced as oil prices continue their recovery.

“We look forward to Advance completing their capital raise activities and the joint venture is eager to get started, with drilling planning already underway.

“Carnarvon is incredibly well placed for an exciting 2021 as we add drilling at the Buffalo Project to our Dorado FEED activities and the Bedout exploration drilling campaign.”

The Buffalo oil field produced 21 million barrels (MMbbls) over five years in the early 2000s. Its redevelopment project will aim to exploit the independently certified 2C oil resource of 31.1MMbbls.

The Buffalo-10 well will target the previously undrilled crest of the Buffalo structure to establish the remaining oil column in the field, which is estimated to be up to 60m.

Advance Energy CEO Leslie Peterkin said: “The teams at Advance Energy and Carnarvon believe the Buffalo Oil Field holds material unrealised value that can be unlocked through re-development. The Advance Energy team will now aim to further build on our ambitious growth strategy.

“Members of the Advance Energy team intend to demonstrate their confidence in the Transaction by aligning with shareholders through participation in the Placing.”