Karoon Gas Australia has signed an agreement to acquire Pacific Exploration and Production’s 35% stake in the jointly held offshore Santos Basin exploration blocks in a $20.5m deal.

The five blocks to be acquired are S-M-1037, S-M-1101, S-M-1102, S-M- 1165 and S-M-1166.

The acquisition follows Pacific’s application submitted with the Superior Court of Justice in Ontario, Canada, during April for insolvency protection.

“The acquisition of Pacific’s interest in the blocks maps a clear path forward for Karoon."

Under the terms of the agreement, Karoon will initially make an upfront cash payment of $15.5m on completion.

A $5m deferred contingent payment will be made by the company upon first production reaching a minimum of one million barrels of oil equivalents from the five blocks.

The agreement is subject to approval from the Petroleum Regulator, the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis and an approval order from Ontario’s Superior Court of Justice.

Karoon Gas Australia managing director Robert Hosking said: “The acquisition of Pacific’s interest in the blocks maps a clear path forward for Karoon to introduce a new funding partner to progress the Echidna discovery appraisal drilling campaign.”

The 352,260km² offshore pre-salt Santos Basin is located in the South Atlantic Ocean, some 300km south-east of Santos, Brazil.

It is the site of several oil fields such as Tupi, Jupiter, and Libra.

Karoon Gas has projects in Australia, Brazil and Peru, and is looking for stakes in early stage exploration opportunities containing large potential targets in basins with proven petroleum systems.