Mosman Oil and Gas (MSMN ) announced that it has signed a binding contract for the sale of the Welch Project, in Texas, U.S. for US$0.42 million (around A$553 million) in cash. 

The oil exploration, development and production company told investors that it will sell the project to Steadfast Energy Partners (50%) and Silver Dollar Energy Investments (50%). 

Today’s sale has been secured at a 40% premium to Mosman’s previously aborted sale for the project with US based company, Eagle Natural Resources which was agreed at $0.3m. 

Whilst the Welch oil field is producing, Mosmon told investors, the ranking of projects in the Strategic Review prioritised assets with lower operating costs including the projects in East Texas. The company noted that the sale’s closing is now scheduled for 15 January 2021. 

The sale will result in a surplus over current carrying value of US$0.084m (around A$110m) and the capital realised from the sale will facilitate investment in these target growth areas.  

Welch, which is located in the Permian Basin, contributed a gross profit of A$0.228m in the year to 30 June 2020 and the carrying value of the Project as at 30 June 2020 was A$5m. 

The Welch Project consists of 653 acres of leases (held by production) with 10 producing wells, 7 injector wells, and 10 shut-in wells. The Project is a small part of the larger Welch Oil Field, which was discovered in 1941 and has produced in total over 170 million barrels. 

Shares in Mosman Oil and Gas Limited have increased by 15% since the beginning of November 2020 to open 0.67% higher this morning at 0.15p following the announcement. 

Commenting on the incoming sale, John W Barr, Chairman of Mosman told investors: 

"The intention to sell Welch was first announced in February 2020, and a sale contract was signed in March, however despite time extensions, the counter-party did not complete that sale contract. We are pleased to have secured a new sale agreement at a 40% premium.” 

Barr has described the Welch Project as “a valuable stepping-stone for Mosman in terms of experience and building a production base in the US while we built a position in East Texas.” 

He added that, “The sale of Welch will enable management to focus on further development of the projects where we see strong near-term development potential." 

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