Planet Gas (ASX:PGS) has entered into an agreement with an American subsidiary Macquarie Bank (ASX:MQG) for the purchase of a 3% Overriding Royalty Interest (ORRI).
The royalty is over established oil and gas production assets in the U.S. which total 500,000 barrels of oil equivalent per annum.
The company's net ORRI pre-tax revenues are estimated to be US$650,000 per annum on production assets with a 3% per annum decline curve.
Purchase consideration is US$4.58 million, with US$1.38 million funded from existing cash reserves, and US$3.2 million via drawdown of a 5 year, US$15 million debt facility provided by Macquarie.
This facility will be repaid US$150,000 per annum, plus a final payment of US$2.6 million.
PGS' existing interests in the Cooper Basin, South Australia, are fully funded by the joint venture partners providing the opportunity to acquire this royalty interest.
PGS is looking at further royalty acquisition opportunities, to be funded by a mixture of debt and equity, as part of a wider strategy targeting low risk royalty and other cash flow assets with development upside.
The company is capitalised at $10 million.
