Mosaic Oil NL announced today that it has sold its Papua New Guinea subsidiary for $US11 million or $A12.7 million in cash to an unidentified company it merely described as a major player in the international oil and gas industry.

As part of the agreement, the junior oil and gas producer said that apart from the initial cash payment, it is also set to get contingent cash payment of $US0.10 or $A.115 per gigajoule for any reserve increases in the proven plus probable category before December 31, 2012.

The company said that Mosaic Oil Niugini Ltd's prime attraction is its 28.5 percent holdings in the permit containing the Oil Search Ltd-operated Kimu gas exploration site, which Mosaic declared as negligible to the company's overall interests.

Mosaic said that the sale would be subjected to pre-emption by the company's joint venture partners in the permit and completion of the deal could be seen by late July or early August, as it added that it is bound to receive up to $US2.7 million or $A3.12 million more cash prior to the drilling of the appraisal well by the buyer.

Mosaic chief executive Alex Parks is happy that the deal "leaves Mosaic with a very solid cash position to fund activities in our Surat-Bowen, New Zealand and Cooper-Eromanga Basin acreage opportunities."

As of 1234 AEST, Mosaic shares were trading at 8.3 cents, gaining by 0.3 cents or 3.75 percent.