Australia's largest live export company Wellard has agreed to sell one of its livestock ships to Heytesbury Cattle Company for $US22 million ($31.2 million).

Key points: Wellard to sell its ship Ocean Swagman for $US22 million to Heytesbury Cattle Company

Wellard to sell its ship Ocean Swagman for $US22 million to Heytesbury Cattle Company Wellard will lease the ship back from Heytesbury until March 2021

Wellard will lease the ship back from Heytesbury until March 2021 Funds from the sale will be used to pay down some of Wellard's $US85 million debt

Wellard will sell the Ocean Swagman, which has a capacity of 7,000 cattle or 26,000 sheep, just over two years after the company sold its sister ship the Ocean Outback.

The vessel was purpose-built for a cost of $40 million in 2010, with its sale to expected to settle in August.

The sale is part of a broader plan by Wellard to restructure, reduce debts, and turn around its poor financial performance.

Under the agreement, announced to the ASX on Thursday, Wellard will charter the Ocean Swagman from Heytesbury until March 2021, with an option to extend for another four years.

Heytesbury, which runs a herd of around 160,000 head of cattle in the Northern Territory and Western Australia, started buying into Wellard in March 2017, and now owns 11.42 per cent of the company.

In a statement, Wellard executive chairman John Klepac said the funds generated from the sale of the Ocean Swagman will primarily be used to pay down debt.

"Heytesbury's purchase of the Ocean Swagman provides an attractive opportunity for Wellard to realise the equity value in the ship, while retaining continued use of the vessel for chartering or exporting opportunities," Mr Klepac said.

"Heytesbury has a deep understanding of the business, and we look forward to continuing our very productive working relationship."

Heytesbury Cattle Company runs around 160,000 head of cattle across the NT and WA. ( ABC Rural: Daniel Fitzgerald )

Wellard cutting debt to $US64 million

After the sale, Wellard expects its overall debt to reduce from approximately $US85 million to approximately $US64 million.

"There is still more work to do on the balance sheet to get it to a level where it needs to be, and this remains a priority for the company," Mr Klepac said.

"The sale of the Ocean Swagman and the ongoing cooperation of [a group of our major creditors] … will make additional restructure initiatives more attractive to investors."

Wellard became the first live export company to list on the stock exchange, when it made its debut on the ASX in December 2015.

Its share price began life at $1.36 and has been on the slide ever since, bottoming out at just 2 cents a share earlier this week before going into a trading halt.

News of the Ocean Swagman deal injected some life into the Wellard stock, with shares up 4.17 per cent at the time of publishing.

'Live export industry still strong'

President of the Queensland Livestock Exporters' Association Greg Pankhurst said despite Wellard's financial woes, the cattle export industry remains fundamentally strong.

"The trade's good, it's solid, Indonesia will import the best part of 500,000 cattle this year, so demand is still there and strong," he said.

Mr Pankhurst said the news that Heytesbury would lease the Ocean Swagman back to Wellard, to continue servicing Australian exporters, was excellent news.

"That's a great thing, Heytesbury are massive supporters of live export, it's a great thing for them to do that," he said.

"It's a good ship, state-of-the-art with good ventilation and water systems, it's a good thing to keep it in Australian waters."

While he believes supply is adequate to meet demand for both feeder and slaughter cattle, citing stable prices out of the ports of Darwin and Townsville, Mr Pankhurst said concerns remained about future cattle orders.

"Especially cattle for the Vietnam slaughter cattle market, those heavy bullocks for there would traditionally be available, [but] in six to eight weeks supply could be a concern if rain is recorded," he said.