Deltic agrees farm-out with Cairn for five SNS licences

Deltic Energy plc announced it had entered into a binding, conditional farm-out agreement with Cairn Energy plc for five of its gas licences in the Southern North Sea.

The natural gas-focused company signed the deal through Cairn’s wholly owned subsidiary Nautical Petroleum Ltd.

TERMS

Cairn will acquire a 60% interest in each of licences P2428 (Cupertino Area) and P2567 (Cadence) and a 70% interest in each of licences P2560, P2561 and P2562 located between the Breagh and Tolmount gas fields.

Deltic will retain a 40% interest in licences P2428 and P2567 and a 30% interest in licences P2560, P2561 and P2562.

Cairn will fund 100% of an agreed work programme, including shooting new seismic data over licence P2428, for each of the five licences up to making a drill or drop decision on each licence.  

Following the farm-out agreement becoming unconditional, Cairn will pay Deltic an up-front consideration of US$1 million by way of contribution towards historic back costs incurred by Deltic across the licence areas.

Should drilling proceed on either P2428 and P2567, which contain the most advanced prospects, Cairn will fund 70% of the costs of whichever well is drilled first, subject to a gross well cost cap of US$25 million . 

Completion of the farm-out is conditional on the entering into of a joint operating agreement and obtaining standard regulatory consents from the Oil & Gas Authority, subject to a three-month backstop.

Cairn will become operator of all five licences following completion.

COMMITMENT

Deltic chief executive Graham Swindells said that the farm-out agreement represented the start of a wide-ranging partnership with Cairn.

“[the partnership] provides further endorsement of the quality of the portfolio that our team has developed and also our gas focussed exploration strategy, as we continue to supply our conveyor belt of opportunities and attract the best partners to facilitate potential drilling.

“We are particularly excited at the prospect of building our partnership with Cairn, a well-funded and highly experienced North Sea operator. 

“Both parties share a commitment to pursuing high impact exploration opportunities in the Southern North Sea and successfully developing these gas prospects.”