Egdon Resources has provided an update in relation to its Mairy Permit located in the eastern part of the Paris Basin in onshore France.

The AIM-listed oil and gas exploration company stated that it had been informed by operator, Hess Oil France, that drilling operations had commenced on January 20th at the Huiron-1 exploration well in the permit.

The well is expected to evaluate the hydrocarbon potential of Jurassic, Rhaetian and older formations and is expected to take around 60 days to drill.

Finalisation of farmout of interest in Mairy PermitIn addition, Egdon stated that it had finalised a farm-out of part of its interest in the Mairy Permit to Hess.

Under the terms of the farm-out, Egdon stated that it will transfer an unencumbered 35% interest in the permit to Hess, taking their total beneficial interest to 85%, in return for a carry of the well costs attaching to Egdon's retained 15% interest, capped at the level of a gross cost of $10.25m for the Huiron-1 well.

Additionally, Hess will carry Egdon for $0.5m of other general and administrative costs on the permit.

The effective date for the farmout is January 1st 2012 and the farm-out is subject to the standard government approval process.

Agreement reached with Geoex EasternEgdon further advised that it had reached an agreement with Geoex Eastern to reduce the burden of an existing overriding royalty on the permit from 4.5% of Egdon's pre- farm-out interest to 4.5% of the retained 15% interest only.

The consideration payable to Geoex for the restructuring comprises $100,255 payable in cash and $100,000 in new Egdon ordinary shares calculated by reference to the average closing price for the five trading days prior to completion.

Managing Director of Egdon, said: "We are pleased to have finalised the restructuring of our interest in the Mairy Permit and as a result have significantly reduced our financial exposure to the Huiron-1 well. We await the results of the well with interest."

MF

Related share prices
Egdon Resources (EDR) share price