Orcadian Energy plc has signed a conditional $3.1 million farm-out with Ping Petroleum Ltd for an 81.25% interest in the central North Sea Pilot oil field.
TERMS
The Malaysian-owned company will pay an initial $100,000 on receipt of licence P2244 subject to conditions of the sale and purchase agreement expected before the end of March 2024.
These include due diligence by Ping, Orcadian shareholders’ approval, consent from NSTA as well as Shell which is owed $1m and TGS ASA with which Orcadian has a seismic licensing deal, Ping’s parent company Dagang NeXchange Berhad and, if required, shareholders.
Completion will see Ping, which also owns the Excalibur FPSO, become operator of the licence while Orcadian will continue to provide sub-surface support.
Ping will pay the balance of $3m on the North Sea Transition Authority’s approval of a field development plan.
Orcadian, which currently has £115,000, anticipates that the FDP will be submitted during 2024.
Ping will also pay all Orcadian’s share of costs incurred in the pre-first oil development scope of work on the Pilot field, and any other costs relating to the Pilot development incurred prior to first oil.
Ping and Orcadian will co-operate to settle the historic and future liabilities to TGS, to a maximum $1,072,000.
LICENCE P2320
The two companies also intend to jointly bid for the area of former licence P2320 for which they have asked the NSTA to allow an out-of-round licence application.
P2320 contains the Crinan and Dandy discoveries and Carra prospect which Orcadian had to relinquish in May.
The acreage contains extensions of the Pilot field, the likely location of a wellhead platform to be installed later in field life, and the Feugh oil and gas discovery.
Orcadian believes that the Pilot field is “one of the largest undeveloped discoveries” in the central North Sea, with “significant” potential in the surrounding area.
Ping will acquire net reserves or resources of 63.4 MMbbl on completion of the deal, with Orcadian retaining 14.6 MMbbl of 2P reserves, carried to first oil, based on a competent person’s report by Sproule in 2021.
The two companies will also deliver a FDP to the NSTA for a polymer flood development of the Pilot field, with industry-leading emissions performance, which Orcadian believes could increase ultimate Pilot field recovery by 5-10%.
Chief executive Steve Brown said that the deal would be transformational for Orcadian.
“Not only does it set out a clear pathway to production for the Pilot field, but also provides a number of opportunities, which we are excited about, in the wider Western Platform area which this partnership will enable us to grasp.
“The board consider Ping to be an innovative operator that understands how to deliver development projects that concord with the NSTA’s net zero goals.
“We have been impressed with Ping’s commercial agility and technical ability, and we look forward to working with the Ping team to deliver a successful Pilot development.”