88 Energy will farm-out Project Icewine in Central North Slope, Alaska to Premier Oil for a 60 per cent interest in the Western Play Fairway.
Premier will pay the full costs of an appraisal well, Charlie-1, up to a total of US$23 million ($34 million).
88 Energy will operate the well via its Alaskan subsidiary, Accumulate Energy Alaska.
A 30 per cent working interest will be held by 88 Energy, while Burgundy Xploration will hold the remaining 10 per cent interest.
88 Energy managing director Dave Wall said, “The deal strikes a good balance between cultural fit, value and the meaningful working interest by 88 Energy for its shareholders.
“The Charlie-1 well has been designed to test all of the prospective horizons identified in the Western Play Fairway, giving benefit usually only derived from a multi-well program.”
After the farm-out, 2.9 billion barrels of oil is expected to be produced from the Western, Central and Eastern Play Fairway. 88 Energy expects to receive over a billion barrels of oil.
After completion of the works, Premier will have the option to assume operatorship of the well.
If development is successful, Premier can opt to purchase 50 per cent of working interest in the Central Play Fairway or the Eastern Play Fairway for US$15 million ($22 million).
Project Icewine is located on an oil-rich province spanning 528,000 acres.