Emerald said today its exposure to drilling costs will reduce from 25% to 13% in the first well in the upcoming Canning Basin exploration program.

Operator Arc Energy will pay 12% of the agreed earn-in expenditure for a 6% working interest in the licences, with Emerald retaining the right to earn a 12.75% interest for payment of 13% of the costs of the first well.

Emerald said this agreement would significantly reduce its costs in the wells, while preserving a meaningful working interest level in a high potential project.

The joint venture, which includes Empire Oil & Gas, Pancontinental Oil & Gas and First Australian Resources, is scheduled to drill two wells from the same location in July.

A vertical well will test the Valentine prospect, which has the potential to contain up to 1 trillion cubic feet of gas; and a deviated well will test the Stokes Bay prospect, which is a follow-up to the Point Torment gas discovery and could contain up to 80 billion cubic feet of gas and 10.3 million barrels of condensate.

Emerald also said it had agreed to a placement to raise up to $3.015 million to provide additional funds for upcoming drilling activities in the US and the Canning Basin.

The company would issue up to 16.75 million shares, at 18c each, with a free attached one-for-two listed option, to clients of Capital Investment Partners.

As well as the two Canning wells, funds would used for the Egeberg-1 oil well, currently drilling in North Dakota, and for the scheduled June spudding of the first well in the Hope prospect, Texas.

The company said it was currently reviewing several exploration projects in the US for possible participation.