Falcon Oil & Gas cleans up Beetaloo royalty as it advances farm-out process

Falcon Oil & Gas (LON:FOG) has agreed a deal to remove the 4% royalty over its assets in the Beetaloo basin, in Australia.

This piece of corporate housekeeping comes as Falcon is pursuing a farm out deal.

Initially it is paying US$999,000 upon signing the deal, then it will pay another US$999,000 to buy out a 3% Overriding Royalty Interest (ORRI). The second payment will be made once a farm-out deal is completed.

The remaining 1% royalty can be bought, at Falcon’s option, for US$5mln over the next five years.

"We are delighted to have negotiated this reduction in the Overriding Royalty on our Australian assets,” chief executive Philip O’Quigley said in a statement.

“This transaction should help to further progress our farm-out negotiations, which are at an advanced stage.

“Together with the significant seismic programme completed last year, this transaction further increases the value of our assets in the Northern Territory."

In July the group took back full ownership of the four permits because US giant Hess had elected not to pull the trigger on a five-well programme, after being refused a month-long extension to its agreement with London and Dublin-listed explorer.

However, Falcon had what it described as "unsolicited interest" from other large companies looking to partner on what is shaping up to be a world-class conventional and unconventional oil and gas play.

Falcon has been carrying out a new farm out process since then and in September O’Quigley revealed he was confident a deal would be ready “at the shorter end” of the three to six month timescale it takes to tie up these sort of agreements.