Australia-based oil firm Santos has conditionally exercised an option to acquire an 80% stake in the WA-488-P permit containing the Beehive prospect offshore Australia, from Melbana Energy.

Under the terms of the agreement, Santos will finance 100% of the cost of the Beehive-1 exploration well in the permit area.

Santos is in discussions with numerous parties on participation in the exploration well. France’s Total had decided not to proceed with the stake acquisition in the permit.

The company has also specified that the work that it has carried out regarding rig availability indicates drilling might not be able to commence prior to the end of the current permit year of December 2020.

Santos needs to complete farm-down before 4 March, 2020 for acquisition

Melbana has granted Santos until 4 March, 2020 to complete a farm-down of its right to buy 80% stake. If successful, the companies would then seek an extension to the current permit year.

In case, Santos fails to complete a farmdown by March 2020, Melbana will retain a 100% interest.

Santos has also agreed to fund an application for an environmental permit for Beehive-1.

Melbana chairman Andrew Purcell said: “Santos’ decision to farmdown its large equity interest in Beehive is entirely consistent with its recently stated strategy of optimising its portfolio through acquisitions, disposals and farmouts, particularly in northern Australia where it is working to reduce its equity in the Barossa field and Darwin LNG to 50% or less.

“We’re pleased to continue to work cooperatively with Santos given the commitment they’ve shown to Beehive – a prospect with 388 million barrels of oil equivalent of prospective resource (best estimate) and potentially 1.6 billion barrels of oil equivalent of prospective resource (high estimate) which, if proven, would prove transformative for each of our companies and for northern Australia.”

In September 2019, Santos, in a joint venture with British oil major BP, was awarded new acreage which lies adjacent to its existing oil discovery, Dorado, offshore Northern Carnarvon Basin in WA.

The 50:50 joint venture will undertake exploration activities at the new permit, WA-541-P in the Bedout Sub-basin.