Oil junior Kimberley Oil has signed an option agreement with Canada’s Golden Dynasty Resources Ltd that could see up to $3 million spent on its Canning Basin projects and a further $500,000 on the development of its oil solidification technology.
The company hopes the development will create renewed interest in the neglected Canning Basin.
The agreement provides the exclusive rights for Golden Dynasty to earn up to an 80 per cent interest in Kimberley’s wholly owned subsidiary Terratek Drilling Tools through the expenditure of $3 million on exploration and $500,000 on research and development in the next 24 months.
In consideration of the 60-day option, Kimberley Oil will be paid a non-refundable $200,000 fee and reimbursement sum.
Kimberley Oil managing director Alan Flavelle said the agreement was significant because it would significantly increase the amount of oil produced from the company’s five operating fields.
Mr Flavelle also said increased activity in the Canning Basin would pave the way for other companies to undertake projects in the area.
“It’s a fair while since anyone has drilled any holes up in the Derby-Broome area,” he said.
“This first agreement will really start something off.”
Claremont-based Empire Oil also has high hopes for renewed interest in the Canning Basin and agreed Kimberley’s Canadian deal would help draw renewed interest to the area.
“The Canadians understand this type of basin very well.
“There are not a lot of believers at the moment with the Canning Basin but I think that that will change.
“Alan Flavelle is quite right in that the Canning Basin has been neglected for a while and there will be some focus back on that area.
Empire hopes to drill its Stokes Bay-1 well, which is located near Derby in the Canning Basin, before the end of the year
Terratek is a 100 per cent-owned subsidiary of Kimberley Oil, which owns the relevant exploration permits.
Mr Flavelle said that currently the company was drilling about 70 to 80 barrels of oil a day from the company’s five producing fields.
The permits included in the transaction represent about 7 per cent of Kimberley Oil’s Canning Basin holdings.
