EDR.L Share News (EDR)

Alkane Energy has unveiled an agreement with Edgon Resources to transfer rights over its shale interests in 10 licence areas to Egdon in exchange for shares.A total of 40m Edgon shares will be issued to Alkane, based on independent resource estimates.The transfer of the assets gives Alkane an 18% stake of Edgon's enlgarged issued share capital. Alkane's acreage will be progressed by Egdon Resources, a UK onshore operator, which is raising funding to take the assets through the appraisal stages.The 40m Egdon shares are valued at £8m based on Egdon's equity fundraising price of 20p per share. This will be treated as an exceptional profit in Alkane's 2014 accounts after offsetting deal costs and some acreage carrying value, it explained. As a condition of the agreement, Egdon has also undertaken a £6.4m placing with an associated £0.6m open offer to existing Egdon shareholders to provide working capital for the enlarged group to fund exploration and development of its shale gas acreage during the next three years, allowing the group to work up a number of drill ready prospects. Neil O'Brien, the Chief Executive Officer of Alkane, said: "Alkane Energy's review highlighted our desire to work with partners who could bring skills, resources and scale to our shale acreage to enhance its value through the development stages. In addition, we believe the deal with Edgon will create an entity which can powerfully bid for further acreage in the 14th Onshore Licensing Round. "This is a very important strategic agreement for Alkane. It will enable us to benefit from the potential upside from the development of shale gas in the UK whilst we remain focused on growing our core business. Working in combination, Egdon and Alkane have the scale and expertise to fund the development of shale assets. In addition, through its shareholding in the enlarged Egdon, Alkane will have an important voice on the board."Alkane's share price had fallen 5.66% to 41.28p by 13:18, while Edgon shares leapt 10.14% to 23.92p.NR