Further to the announcement made on 5 December 2013, Egdon Resources plc (AIM:EDR) is pleased to announce that it has exercised its Exploration Option and Farm-in Agreement (“The Agreement”) with Scottish Power Generation Limited (“SPG”) to farm in to UK Onshore Production Licences PL161 (Block SE/60b) and PL162 (Blocks SE/70a and SE/80b) located in Lincolnshire and South Yorkshire.

The Agreement defines an “Exploration Area”, which excludes those parts of PL161 and PL162 relating to the Hatfield Moor operational gas store, the Hatfield West gas storage reservoir and the operational gas reception facility operated by SPG.Under the terms of The Agreement, SPG granted Egdon an Option Period of twelve months by the end of which Egdon was required to either advise SPG of its intention to commit to the drilling of an exploration well in the Exploration Area (the “Option Well”) or else terminate The Agreement.

During the Option Period, Egdon undertook a full evaluation of the hydrocarbon potential of the Exploration Area, which included reprocessing all relevant existing 2D seismic data. Egdon is very encouraged by the results of this evaluation, both in terms of conventional and unconventional prospectivity, and has elected to exercise its option.

Egdon will meet the full cost of the drilling and evaluation of a well in the Exploration Area to the point of either abandonment or suspension in the case of a discovery. Egdon will earn a 50% working interest in the Exploration Area through the drilling of the Option Well and will become Operator of the Exploration Area. Initial work will comprise new 2D acquisition to finalise the location for the option well.

The transaction is subject both to certain conditions precedent and to approval by the Secretary of State for the Department of Energy and Climate Change.

Commenting on the announcement, Mark Abbott, Managing Director of Egdon said:

We are very encouraged by the results of our evaluation of PL161 and PL162, both in terms of conventional and unconventional prospectivity, and look forward to working with SPG in exploring these exciting plays. We expect to see a play opening well operated by our partner IGas on neighbouring acreage in H2 2015, which should aid in de-risking the unconventional plays on PL161 and PL162.

The exercise of this option is consistent with our strategy of increasing our exposure to shale-gas prospective acreage in our Gainsborough Trough core area.