Ambassador Oil and Gas Ltd has entered into a binding Heads of Agreement to negotiate a farm-out of a 70% share of its highly prospective PEL 570 oil and gas exploration permit in the South Australian portion of the Cooper Basin to Outback Energy Hunter Pty Ltd.

The Heads of Agreement provides for the parties to negotiate a fully termed farm-out agreement under which Outback Energy Hunter will agree to pay all costs (including funding Ambassador's remaining 30% share) associated with the exploration work program to satisfy the first 5 year term of PEL 570 up to a maximum of A$50 million. The work program includes the acquisition of 500 square km of 3D seismic and the drilling of three wells.

The farm-out will be conditional upon Outback Energy Hunter subscribing for shares in Ambassador at a subscription price of 25 cents per share. The number of shares to be subscribed for is to be that number of Ambassador's listed options which have not been exercised by their expiry date of 31 October 2013 (capped at 36.5 million shares or $9.1 million) and, Outback Energy Hunter finalising their financing.

Tags: Ambassador Oil and Gas Ltd