Egdon Resources plc (AIM:EDR) is pleased to announce that it has signed an Exploration Option and Farm-in Agreement (“The Agreement”) with Scottish Power Generation Limited (“SPG”) in respect of UK Onshore Production Licences PL161 (Block SE/60b) and PL162 (Blocks SE/70a and SE/80b) located in Lincolnshire.

The Agreement defines an “Exploration Area” which excludes those parts of PL161 and PL162 which relate to the Hatfield Moor and Hatfield West gas storage facilities, both operated by SPG.

Under the terms of The Agreement SPG has granted Egdon an Option Period of twelve months by the end of which Egdon is 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 will undertake, at its own cost and risk, a full evaluation of the hydrocarbon potential of the Exploration Area to include reprocessing all relevant existing 2D seismic data, evaluation of all available well data, and generation of a full review and report on the hydrocarbon prospectivity of the Exploration Area.

In the event that Egdon commits to drill the Option Well, Egdon will meet the full cost of the drilling and evaluation of the well 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.

PL161 and PL162 are located in the East Midlands Petroleum Province, on the northern margin of the Gainsborough Trough geological basin.  The licences contain the Hatfield Moor and Hatfield West gas fields which produced gas from sandstones of Carboniferous age from the 1980s. The two fields are now depleted and are operating as gas storage facilities. In addition, five exploration wells were drilled in the Exploration Area between 1973 and 1978.  Egdon currently holds interests in licences to the south (PEDL139 and PEDL140) and south east (PEDL209) of the Exploration Area.  The Company’s preliminary regional evaluation has indicated the potential for there to be both undiscovered conventional and unconventional oil and gas resources within the Exploration Area.

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

“We are delighted to have reached agreement with SPG in relation to the option to farm-in to these two licences. The Agreement provides Egdon with an opportunity to develop our position within one of our core areas during a time when we are progressing drilling plans in the adjoining licences which should lead to a better understanding of the hydrocarbon potential of the Exploration Area.

We look forward to working with SPG as we progress our detailed evaluation of the area over the coming year and we will update shareholders once we are in a position to do so.”