Egdon Resources has reached agreement on heads of terms in respect of a farm-out of interests in its PEDL253 licence to Union Jack Oil and Humber Oil & Gas, it announced on Monday.
The AIM-traded firm's PEDL253 licence is located in Lincolnshire, and contains the Biscathorpe Prospect, scheduled for drilling around mid-2018.

Under the agreed terms, UJO and Humber would each acquire 6% of Egdon's interest in PEDL253 by paying their pro-rata share of the Biscathorpe-2 well cost, plus an additional £10,000 per percentage point interest acquired.

This was equivalent to a farm-in with a 1.36x promote at the estimated well cost, Egdon's board explained.

UJO and Humber would also each acquire 4% of the Montrose Industries interest in PEDL253 under the same terms.

The Biscathorpe Prospect is located between Lincoln and Louth, lying on the southern margin of the Humber Basin on trend with - and to the west of - the Egdon-operated producing Keddington oil field and the Saltfleetby gas field.

Egdon said the Biscathorpe-2 well would target a down-dip area of the structure, which was tested in a crestal position by the Biscathorpe-1 well drilled in 1987 by BP, which found oil in a 1.2 metre-thick sandstone of Westphalian age.

The structure had been mapped using reprocessed 3D seismic data, and the sandstone was predicted to thicken to the north and east away from the Biscathorpe-1 well.

It said the mean gross prospective resources at Biscathorpe were estimated to be around 14 million barrels of oil, and the well had been assessed by the company as having a 40% chance of success.

The transaction remained subject to contract and approval from the Oil and Gas Authority.

On completion the interests in PEDL253 would consist of the operator Egdon Resources at 40.80%, and a 29.31% share of the well cost, as well as Montrose Industries at 27.20%, and a 19.54% share of the well cost.

Union Jack Oil would hold 22.00% and a 37.57% share of the well cost, while Humber Oil & Gas would hold 10.00 % and a 13.57% share of the well cost.

"We are pleased to have achieved our objective of balancing our financial exposure and technical risk on the near-term Biscathorpe-2 well," said Egdon managing director Mark Abbott.

"We welcome both Humber Oil & Gas as a new partner and UJO's increased participation in PEDL253.

"We now look forward to drilling this high potential conventional oil prospect around mid-2018."

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