The deal is similar to one made by Impress subsidiary, Springfield Oil and Gas, earlier this week for the same permit with a 25% funding contribution earning a 12.5% stake. The estimated cost of the initial program is $4.2 million after which Kalrez will contribute at its working interest rate (12.5%).

New chairman Joe Mercorella said there would be no capital raising required and therefore no dilution for shareholders.

"It will be funded from internal cashflows," said Mercorella. "There will be no dilution at all."

The deal is a change of direction for the company which has been Indonesian-focussed with its interests in the Bula and Seram oil fields, and signals a new start after the removal of troublesome manager, Kalgoorlie Mine Management.

"We are now in the position where we can start considering opportunities like these," said Mercorella.

The company has also received approval to commence drilling commitment development well 18k-6 and is presently mobilising Rig 482 to the Bula oilfield in preparation for spudding.

The well is targetting the Bula Tenggara formation which has two main reservoir intervals, the Pliocene Lower Fufa-Basal Fufa sequence and the underlying Mesozoic Pre Fufa.

Well 18K-6 is a twin well to 18S-6 drilled in 1986. Subsequent remedial work in 1988 and 1989 damaged the well, reducing production from around 90 BOPD to less than 10 BOPD. Well 18K-6 is intended to penetrate the Basal Fufa sand encountered from 242.5-250 mKB in 18S-6, which was the productive zone in this well.

The proposed total depth of the well is 260 metres and is expected to take 10 14 days to complete. The well is being completed so that as Basal Fufa production declines, the well can be deepened to test the Pre Fufa reservoir in the future.