Egdon Resources plc (AIM:EDR) is pleased to announce that it has reached agreement in respect of farm-outs in Petroleum Exploration and Development Licences (“PEDLs”) PEDL253 and PEDL241 to Union Jack Oil plc (“Union Jack”). Additionally, Egdon and Union Jack have signed a Letter of Intent whereby Union Jack has been granted an option to acquire a 10% interest in the North Somercotes Prospect in PEDL005R and a further 5% interest in PEDL241 from Egdon.
The transfer of interests is subject to approval by the Department of Energy and Climate Change.
Farm-out of PEDL253
PEDL253 is located in Lincolnshire to the West of the Saltfleetby gasfield and Keddington oilfield and contains the Biscathorpe Prospect.
Under the terms of the farm-out, Union Jack will earn a 6% interest from Egdon in PEDL253 in return for paying 12% of the cost of the planned Biscathorpe-2 exploration well.
The Biscathorpe Prospect is a four-way dip closed structure over a basal Dinantian carbonate high. The Biscathorpe structure was initially drilled by BP in 1987 with the Biscathorpe-1 well encountering a thin, oil-filled sandstone on the crest of the structure. The prospect is defined by 3D seismic data which has been reprocessed by Egdon and along with regional well data and nearby analogues indicates the potential for thickening of the sandstones off the high to the north and northeast. In addition, potential exists for stratigraphic trapping of the reservoir to the west of the structural closure. The mean Prospective Resource for the main reservoir objective, as calculated by Egdon is estimated to be 17.81 million barrels of oil.
The subsurface target location to test the Biscathorpe Prospect has been defined, a surface location has been identified and terms agreed for a well site from which a vertical well can be drilled to test the primary reservoir objective. Drilling operations are planned to commence in late Q4 2013 or early Q1 2014 subject to receipt of planning and other consents.
Union Jack has also agreed terms with Montrose Energy Limited to earn a further 4% interest in return for paying 8% of the well cost.
On completion the interests in PEDL253 will be as follows:
|Egdon Resources U.K. Limited||54% (operator)|
|Montrose Energy Limited||36%|
|Union Jack Oil plc||10%|
Farm-out of PEDL241 and Option
PEDL241 is located in Lincolnshire and contains the North Kelsey Prospect, a tilted fault block closure, defined on 3D seismic.
Under the terms of the farm-out agreement Union Jack will pay 20% of the cost of the North Kelsey well to earn a 10% interest in PEDL241 from Egdon.
The North Kelsey Prospect is near to the Crosby Warren oilfield and oil discoveries at Broughton and Brigg. The subsurface location to test the prospect has been identified, a surface drilling location has been identified and terms agreed. Drilling operations are planned for late Q4 2013 or Q1 2014 subject to receipt of planning and other consents.
There is potential for up to four stacked reservoir intervals on the North Kelsey Prospect, namely the Chatsworth, Beacon Hill, Ravensthorpe and Santon sandstones. The mean combined Prospective Resources for these multiple objectives, as calculated by Egdon are estimated to be 6.7 million barrels of oil.
On completion the licence interests in PEDL241 will be as follows:
|Egdon Resources U.K. Limited||40% (operator)|
|Celtique Energie Petroleum Limited||50%|
|Union Jack Oil plc||10%|
In addition, a Letter of Intent between Egdon and Union Jack grants Union Jack an option to enter into a second Farm-In agreement for a further 5% participating Interest in PEDL241 under the same terms as above. The Letter of Intent will terminate on 31 July 2013 should the option not be exercised.
North Somercotes Prospect Option
The Letter of Intent also grants Union Jack the option to acquire a 10% Participating Interest in PEDL005R, limited to the part block which contains the North Somercotes Prospect, in return for paying 20% of the well cost. The Letter of Intent will terminate on 31 July 2013 should the option not be exercised.
Located in the onshore South Humber Basin, approximately 5 kilometres north of the Saltfleetby gasfield, the North Somercotes Prospect is a gas prospect on a proven productive fairway, with a tilted fault-block closure defined on 3D seismic data. The mean Prospective Resources at the main objective, as calculated by Egdon are estimated to be 9 billion cubic feet of gas.
A surface location has been identified and a planning application is in preparation. It is intended to drill a well on the North Somercotes Prospect, subject to necessary consents, during 2014 or 2015.
Commenting on the farm-out Mark Abbott, Managing Director of Egdon said:
“We have a number of drill-ready 3D defined prospects in the East Midlands with the potential to add significant shareholder value. These farm-outs show further progress with our strategy designed to manage risk and accelerate activity on our planned near-term drilling programme with a view to realising this value. We are continuing to progress towards an active 2013 and 2014 drilling programme and we continue to discuss further transactions with a number of parties and hope to be able to provide further updates to shareholders in due course.”