Orcadian Energy plc has agreed a non-binding, 81.25% farm-out with an as yet unnamed North Sea operator for the potential development of the Pilot project.
TERMS
The company, which now holds £90,000 and six months to repay $1m million to Shell, has granted the operator an exclusive period until 30 November 2023 to complete the transaction for licence P2244.
Based on a 2021 competent person’s report, the operator would acquire net reserves or resources of 63.4 MMbbl and Orcadian 14.6 MMbbl of 2P reserves, carried to first oil.
After first oil, Orcadian will pay its working interest share of expenditure.
Both parties would prepare a field development plan for a polymer flood development of Pilot and have asked the industry regulator to extend the second term of licence P2244.
To support the development and area plan, both parties will also request an out-of-round application for former P2320, containing the Crinan and Dandy discoveries and Carra prospect, which Orcadian had to relinquish in May.
On completion of the extension of P2244 and the grant of former P2320, Orcadian would receive up to US$200,000 from the operator, and a further $3,000,000 on approval of a Pilot FDP.
The heads of agreement between the two parties is subject to due diligence, negotiations, and approvals among other matters.
SUBSTANTIAL
Chief executive officer Steve Brown added that the deal set out a “potential pathway to production” for the field.
“The Pilot field has a substantial proven reserve base with material upside potential in the surrounding area. We are delighted this transaction could enable Orcadian to retain a significant interest in the project and to enjoy the long-term benefits of producing oil for the UK.
“We look forward to progressing the next stages of this proposed transaction.”
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