Deltic agrees farm-out for five licences with Cairn

Deltic Energy plc has entered into a binding conditional farm-out for five of its southern North Sea gas licences with Cairn Energy plc.

QUALITY

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

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

The company will also fund 100% of an agreed work programme, including acquiring new seismic data over P2428, for each of the licences up to making a drill or drop decision.  

Cairn will pay Deltic an up-front US$1 million by way of contribution towards historic back costs incurred by Deltic across the licences.

Deltic said that if drilling proceeded on either P2428 and P2567, which contain the most advanced prospects, Cairn would fund 70% of the costs of whichever well is drilled first, subject to a gross well cost cap of $25m. 

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

Cairn will become operator of all five licences following completion.

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.”