TMK Energy (TMK) has officially secured funding for its pilot well program in the South Gobi Basin in Mongolia thanks to an earn-in deal with Talon Energy (TPD).
The junior oil and gas explorer today announced Talon had exercised its option to earn a 33 per cent interest in the Gurvantes XXXV Coal Seam Gas (CSG) project in the basin.
As part of this deal, Talon will now fund the first US$3.15 million (A$4.6 million) of the pilot well program, with TMK to remain the operator of the project. TMK said it expected the program to cost US$3.5 million all up, and the two partner companies will each fund the outstanding US$350,00 relative to their respective interests in the project.
TMK plans to begin drilling the pilot wells before the end of March 2023, with commissioning slated for completion during the June quarter of next year.
The company said it was confident gas could be produced to surface in a “relatively short time” after full commissioning.
“Talon has been involved in the Gurvantes XXXV Project since February 2021, and the positive election to become a partner in our project is a great endorsement and a reflection of the value that has been created during the last two years,” TMK CEO Brendan Stats said.
“We now look forward to the next stage of the project, the Pilot Well Program, which aims to flow gas to surface over an extended production test, to demonstrate the productivity of the reservoir and demonstrate the commercial viability of the project.”
On top of the pilot program funding, Talon will also pay TMK just over US$800,000 following TMK’s November 9 release of its “much better than expected” contingent gas resource for the Gurvantes project.
Under the terms of an initial farm-in deal between the companies, Talon is due to pay TMK up to $1 million based on 2C contingent resources of between 0.5 trillion cubic feet (TCF) and 1.5 tcf of gas.
TMK said the initial payment of over US$800,000 so early on in the project’s development was a testament to the potential size of the Gurvantes project.
Talon will fund this payment and its Gurvantes pilot well earn-in obligations with the help of a $12 million share placement announced on Thursday morning.
Shares in TMK Energy were down 5 per cent to 1.9 cents at market close, and Talon shares were up 3.23 per cent to 16 cents.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.