In an arrangement with a group of privately owned, Texas-based companies, Petsec will acquire a 50% interest in 28 lease blocks, a 25% interest in five additional lease blocks, and the right to participate in future US Minerals Management Service lease sales with the group for up to a 35% working interest.

“This transaction increases our leasehold position in the Gulf of Mexico from 17 to 50 leases and provides a substantial boost to our inventory of high quality, drillable prospects with the potential to create significant growth for shareholders,” Petsec executive chairman Terry Fern said.

“In addition, the ongoing joint venture relationship will supplement our exploration program, providing access to a steady stream of prospects ensuring a high level of drilling inventory.”

Terms of the deal announced today are $US9.8 million ($A13 million) cash reimbursement to the sellers, plus retention of a 20% after payout back-in on the initial 33 leases.

Petsec anticipates being named operator on a significant number of the leases.

More than 36 prospects have been mapped to date, with an estimated net unrisked potential of 157 billion cubic feet of gas and 29 million barrels of oil, according to Petsec.

Within this potential is an estimated 43Bcf equivalent of gas net, discovered by prior drilling.

“The leases, which have all been acquired at OCS lease sales in 2005 and 2006, are expected to be tested over the next two to three years,” Fern said.

“First drilling is targeted to commence by November 1, 2006 and will be a two-to-five-well program the Mobile Bay area [offshore Alabama]”.

The transaction is expected to close on August 17.