Woodside Petroleum (WPL) will take a majority stake in Beach Energy's exploration project in western Tanzania.
Woodside, which is looking to build its overseas assets, said it had taken a 70% interest in the Lake Tanganyika South Block which included a production sharing agreement.
The proposed work program includes seismic studies with an option for future drilling and operatorship.
Woodside chief executive Peter Coleman said the deal provided an opportunity for the oil and gas company to secure a large acreage footprint in an underexplored oil prone basin.
Beach managing director Reg Nelson said the agreement was in line with Beach's strategy of getting in early to prospective areas.
At 11.25am (AEST) Woodside shares were 3.5 cents lower at $41.42 and Beach Energy shares were 0.75 cents higher at $1.64.