21st Jan 2020 13:18
(Alliance News) - Egdon Resources PLC's shares jumped on Tuesday as the company penned a farm-in with oil major Royal Dutch Shell PLC.
Shares were 31% higher in afternoon trade in London at a price of 6.90 pence each.
Egdon signed the exclusivity agreement in November with a "large internationally-recognised exploration and production company" covering the P1929 and P2304 offshore UK licences.
On Monday, Egdon said the deadline for an agreement to be finalised had been extended from Sunday last weekend to Thursday this week.
The company has now confirmed the agreement has been signed with Shell UK Ltd.
Shell will take a 70% working interest in the two licences, and will take over operations. Egdon will retain the remaining 30%.
Shell will pay for the stake by funding 85% of the costs of buying and processing 3D seismic survey data for the Resolution and Endeavour gas discoveries on the licences. The acquisition price is capped at USD5 million, beyond which Shell will pay 70% of costs.
The oil major, Egdon said, will also pay the entirety of study and manpower costs up to a well investment decision on the licences.
The Resolution discovery has a mean contingent gas resource of 231 billion cubic feet, and was discovered by French giant Total SA in 1966. The Endeavour discovery has a mean resource of 18 billion cubic feet.
Egdon's Managing Director Mark Abbott said: "We are delighted to have signed a farm-in agreement with Shell in respect of these highly prospective licences. This transaction validates our views on the potential of these blocks and introduces a highly experienced and respected operator to progress appraisal activity on the Resolution and Endeavour gas discoveries.
"In difficult market conditions Egdon has secured a substantial carry on costs to the well investment decision whilst retaining a material 30% interest in the licences."
"Our immediate focus will be to work with Shell to agree a forward work programme and timeline for the licences with the Oil & Gas Authority. The first part of this work programme will be the acquisition of a marine 3D seismic survey to enable a decision on the contingent appraisal well. We look forward to working with Shell and benefiting from their substantial worldwide operational experience and expertise, including in the development of carbonate reservoirs of this type," he continued.
By George Collard; [email protected]
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