Egdon Resources plc (AIM:EDR) and its partners (Blackland Park Exploration Limited (“Blackland”) and Stelinmatvic Industries Limited (“Stelinmatvic”)) are pleased to announce signature of an Opt-in Agreement (“The Agreement”) with Total E&P UK Limited (“Total”), a wholly owned subsidiary of Total SA, in respect of UK Onshore Petroleum Exploration and Development Licence PEDL209 (“The Licence”) located in Lincolnshire. The Licence covers an area of 64 square kilometres and is located adjacent to licences PEDL139/140 (the subject of the recently announced farm-in by Total) and PL161/162 where Egdon has further interests. The Licence is located in the eastern part of the Gainsborough Trough geological basin.
Under the terms of The Agreement, Total will have an option to farm-in to PEDL209 exercisable until 31 December 2015, and will earn a 50% interest in The Licence by paying 100% of an exploration programme of up to £13.47 million (ca. $22 million) which would include seismic acquisition and the drilling of a well. Egdon will continue to be the operator of PEDL209 with Total becoming the operator following the carried work programme.
As consideration for granting of the option, Total will make a non-refundable cash payment totalling £1,530,025 (ca. $2.5 million). Egdon will receive the sum of £918,015 (ca. $1.5 million). The farm-in is subject to approval by the Secretary of State for Energy and Climate Change.
The Laughton-1 well, which is targeting a shallow conventional oil prospect in an area of the licence outside of the main shale-gas potential, will not form part of the deal. In addition two further conventional oil and gas prospects are defined as excluded areas under The Agreement.
The current licence Interests and those applying to the excluded conventional prospects are;
|Egdon Resources U.K. Limited||60%|
|Blackland Park Exploration Limited||28%|
|Stelinmatvic Industries Limited||12%|
Following completion of any farm-in the licence interests will be:
|Egdon Resources U.K. Limited||30%|
|Total E&P UK Limited||50%|
|Blackland Park Exploration Limited||14%|
|Stelinmatvic Industries Limited||6%|
Commenting on The Agreement, Mark Abbott, Managing Director of Egdon, said:
“The Agreement demonstrates further progress with our strategy of delivering value from our unconventional resources and provides a meaningful up-front cash payment and the expectation of funding of a substantial shale-gas exploration programme in this highly prospective part of the Gainsborough Trough. Egdon retains its current 60% interest in the three conventional exploration targets which are located outside of the main shale-gas area and we look forward to drilling the shallow conventional oil prospect at Laughton, where planning consent is in place, during the second half of 2014.
Total has extensive resources and worldwide experience in unconventional hydrocarbon plays and we look forward to working with them in the adjacent PEDL139/140 licences and in due course in PEDL209.”
The Laughton Prospect is a structural trap defined on 2D seismic data. The prospect has multiple conventional Carboniferous sandstone reservoir targets with the primary objective being the Silkstone Rock, an approximately 15 metres thick sandstone interval which is productive in the Corringham oil field 5 kilometres to the South East. Egdon currently estimate gross Mean Prospective Resources of around 1 million barrels of oil for the Silkstone Rock in the Laughton Prospect.
Egdon will pay 100% of the cost of the Laughton-1 exploration well to the point of completion of the well for testing or, in the case that the well is a dry hole, abandonment and restoration of the site. Planning consent was granted by Lincolnshire County Council in July 2013 for this shallow conventional exploration well. Egdon now expects to drill the well during the second half of 2014.
Two additional oil and gas prospects similar to the Laughton structure have also been identified within the Licence’s area and are excluded from the opt-in agreement.