Alcoa relents on debt

BURU Energy's remaining debt due under a decade-old Alcoa gas prepayment has been rescheduled, freeing up the oiler's capital for further development of the Ungani Trend.
Alcoa relents on debt Alcoa relents on debt Alcoa relents on debt Alcoa relents on debt Alcoa relents on debt

Haydn Black

Reporter

Buru announced this morning that the original gas pre-sales agreement between Buru's predecessor ARC Energy and Alcoa to supply gas from the Canning Basin had been renegotiated again.
 
The original deal from 2007 saw Alcoa provide $40 million for exploration and development in the frontier basin, in the expectation ARC, later Buru, would define and deliver up to 500 petajoules of gas, but Buru has been unable to meet its end of the agreement. 
 
Last August Buru agreed to pay $12.5 million of the $25 million remaining by December 2016, with the final $12.5 million due for repayment by June 2018 with no interest payable. 
 
The repayments have now been made less onerous to Buru.
 
The junior will now need to make a $5 million repayment this year and three repayments of $2.5 million each at the end of each year between 2018 and 2020. 
 
In return for Alcoa's largesse, the final $7.5 million unsecured debt will now be subject to a market based interest rate, and will be subject to an accelerated capital repayment mechanism based on Buru's gross revenue from Ungani oil sales exceeding an agreed base level.
 
Buru executive chairman Eric Streitberg said the new agreement provided the flexibility to pay off the debt from surplus cash flow.
 
The company has around $18.7 million in cash and expects payment for its first 80,000 bbl cargo from Wyndham sometime after the first listing in September. 
 
That could generate between $1.6-24 million in revenue, depending on the oil price.
 
"The relationship with Alcoa remains strong and we will continue to consult with them regarding their future gas requirements," he said.
 
Buru, which recently entered into an acreage swap with Mitsubishi for control over the Ungani Trend in return for relinquishing any interest in the massive but still unproven Valhalla-Asgard Laurel Formation unconventional discoveries, has recently turned its attention to the smaller Yulleroo discovery as the centrepiece of its gas strategy, although it is primarily focused on the Ungani oil trend. 
 
It has asked RISC Advisory to provide an update of its 2011 review of the resources of the Yulleroo accumulation and review possible ways forward for the appraisal of gas resource in light of the government policies in relation to the evaluation of unconventional resources, which may prevent fraccing for some time.
 
Assuming funding, most likely from farminees, Buru has defined a number of locations along the Ungani Dolomite trend, plus new targets based on the Anderson/Reeves discovery in Ungani Far West-1, and it was looking to permit large high quality prospects such as Kilto, Bickley, Wright, Rafael, and Yakka Munga for drilling as a priority.
 
It has a number of development locations earmarked in the Ungani Trend too, which paying off the Alcoa loan could have made difficult to fund. 
 
Buru also has a number of large untested conventional gas prospects, such as Ophir, and continued exposure to the Laurel Formation.
 
Buru shares were 16.5c this morning.

 

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