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(Sharecast News) - Mosman Oil and Gas announced the sale of its Australian EP-145 asset to the ASX-listed Echelon Resources on Tuesday, as part of its strategic pivot towards helium exploration and production in the United States.
The AIM-traded firm said the transaction, valued at AUD 0.4m (0.2m) in cash, included a retained 5% royalty on helium and hydrogen sales but excluded seismic equipment, which Mosman expected to sell separately for around AUD 0.15m.
Proceeds from the sale would be directed toward advancing the recently-acquired Sagebrush and Coyote Wash projects in the US.
The board said those projects offered strategic advantages, including moderate drilling costs, existing infrastructure, and significant helium exploration potential, with no prescribed expenditure commitments.
It said the decision to divest EP-145 followed a portfolio review highlighting high costs and operational challenges associated with the Australian asset.
Future expenses for seismic acquisition and interpretation were projected at more than AUD 2.5m, while drilling costs in the region had risen to about AUD 20m.
Additionally, regulatory hurdles, particularly concerning fracking, were further increasing costs and extending approval timelines.
The US-based Sagebrush Project, which includes 10,000 acres of leases held by production and existing infrastructure, currently generates around 40 barrels of oil per day gross and offers further helium exploration opportunities.
Adjacent to Sagebrush, the Coyote Wash Project presented additional prospects identified through seismic data, Mosman explained.
Mosman emphasised that the reallocation of capital to its US helium portfolio aligned with its strategic goal of focusing on assets with high growth potential and manageable expenditure commitments.
The sale remained subject to customary conditions, including regulatory approvals, and was expected to complete in the coming months.
"We have taken a commercial decision to focus our capital allocation and future operational activities on our US projects," said chief executive officer Andy Carroll.
"While EP-145 in the Amadeus Basin has helium potential, the US has the considerable commercial advantages of a proven helium production basin, lower drilling and operating costs, ready availability of services, production infrastructure and access to markets."
Carroll said the company was "pleased" to retain ongoing interests in helium potential in EP-145 with a royalty interest, which would not require any expenditure by Mosman.
"This transaction, once completed, restores Mosman to being fully funded for all exploration commitments in the next 12 months, and with funding available for discretionary exploration activities."
At 1401 GMT, shares in Mosman Oil and Gas were up 9.34% at 0.03p.
Reporting by Josh White for Sharecast.com.