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Fortescue Metals Group has scrapped a planned investment in Canning Basin gas play Oil Basins.

The iron ore miner yesterday terminated its letter of intent which included a $4.2 million investment for an 18 per cent stake in Oil Basins and a further $1.75 million (as part of a broader $10 million funding deal) for a 25 per cent stake in the company's Derby unconventional gas acreage.

Oil Basins said FMG was still interested in taking a direct investment in the company's Derby Block when an application to explore the 5062sqkm permit was approved.

The company anticipates the award of the permit later this month subject to a decision by the National Native Title Tribunal.

Oil Basins said despite its disappointment, it was fielding serious third party interest from an oil and gas exploration company in a similar transaction which might include a participation in a proposed placement and it had received renewed expressions of interest from oil and gas "supermajors" for a farm-in to the Derby Block should it acquire 100 per cent of the permit.

Oil Basins also advised today that it was in dispute with its joint applicant Backreef Oil over its plans to sell its 50 per cent stake and all other rights in the Derby Block to a third party.

Oil Basins said it intended to fully pursue its rights to take full control of the project.

FMG shares were off nine cents, or 1.9 per cent, to $4.64 at 11.30pm while Oil Basins shares were up 0.1 cents, or 2.94 per cent, to 3.4 cents.