(MENAFN - ProactiveInvestors - Australia) Triple Energy (ASX: TNP) has executed a share purchase agreement to wholly acquire CFT Heilongjiang and its 80% interest in a coal seam gas project in Northern China, which is estimated to contain 2 to 7 trillion cubic feet of gas in place.
As consideration for the acquisition, Triple will issue 380 million shares, of which 350 million performance shares will vest in accordance with "milestones".
Triple will also pay a cash amount of 150,000, which together with 30 million shares to be issued at settlement, is consideration for expenses incurred by the Cooperative Joint Venture with Longmay Coal Mining Company since 1 January 2012.
The acquisition provides Triple Energy with a material acreage position, potential for material reserves and a large proximate potential customer base, with a ready gas market.
Resource estimates show there is potential for a meaningful scale gas production in the near term should the upcoming drilling campaign be successful.
There is already a significant amount of data over these areas as Longmay Coal Mining Company, one of China's largest coal miners, has mapped the coal seams by drilling boreholes which have been electrically logged.
Gas in place on just the initial five mine areas to be drilled has been estimated at around 540 billion cubic feet by an independent petroleum consultant.
The specific location and approvals for the upcoming drill stem test well are established and the drilling pad is ready for the rig mobilisation later this month.
A near new U.S. purpose built coal seam gas drilling unit owned by Longmay is onsite and ready to use.
Triple expects the 2012-13 drilling campaign to facilitate a maiden reserves booking for the assets as well as significantly de-risk the entire Cooperative Joint Venture area.
The project is conducted via 45 year Cooperative Joint Venture with Longmay Coal Mining Company.
On completion of the acquisition of CFT, Triple Energy will hold an 80% interest in the project while Longmay will hold the other 20%.
The joint venture operates under the coal mining leases held by Longmay with the Joint Venture Agreement registered with the relevant Chinese Government authorities.
The CJV is staged, initially covering five mine areas, with exclusive access that can ultimately extend the area to cover a total of 42 mine areas.
Subject to completion of due diligence, Triple Energy plans to make available to CFT a loan facility of 500,000 to fund drilling of the initial test well.
Triple will use its existing funds but will also seek to raise 2 million in new capital to fund subsequent near-term test wells and working capital.