Under the terms of this agreement, Latrobe is required to drill, at its own cost, up to two wells to a total depth of 2,000mt, or basement, whichever is reached first. For doing so Latrobe may acquire up to a 50% interest in the designated area. Drilling of the first well is expected to commence by December 31, 2010.
Latrobe will also have first right of refusal over Petro Tech’s share of any hydrocarbon production from the drilled well(s) at a pricing formula related to market rates.
Latrobe is a Victoria-based company formed to mine a brown coal deposit at Gormandale in the Latrobe Valley. Its intention is to process brown coal into a liquid fuel. Should the new joint venture be successful and discover gas in its joint area the methane will substantially reduce Latrobe’s operating cost by increasing the recovery in its process.
Lakes Oil recovered gas in its nearby Loy Yang #2 well drilled in 2005/06, and the same Strzelecki sands will be targeted in these joint venture wells.
This agreement is said to be particularly beneficial for Lakes Oil shareholders as it allows the company to bring forward required exploration activities and provides further opportunity to prove the potential of Lakes Oil’s tight gas play reserves in its permits across Victoria.
