(Sharecast News) - Egdon Resources updated the market on the farm-out process in relation to the Resolution and Endeavour gas discoveries in UK offshore licences P1929 and P2304 respectively on Monday.
The AIM-traded firm's subsidiary, Egdon Resources UK (ERUK), is the operator and currently holds a 100% interest in both licences.
It explained that, following an "extensive" farm-out process, ERUK has signed an exclusivity agreement in respect of licences P1929 and P2304, with a "large internationally-recognised exploration and production company".
Exclusivity was granted to the counterparty, subject to a definitive farm out agreement or other definitive legal agreement being entered into by 19 January, and completion occurring by 19 April.
Given the exclusivity arrangement, discussions and negotiations with other parties had been suspended, and the data room closed while the agreement is in place.
In April, Egdon announced the results of a competent person's report prepared by Schlumberger Oilfield UK in relation to the Resolution gas discovery.
Schlumberger had made independent estimates of mean contingent gas resources of 231 billion cubic feet of gas, with a P90 to P10 range of 100 to 389 billion cubic feet, that could be attributed to the Zechstein reservoir in the 1966 gas discovery made by Total in well 41/18-2.
Egdon had previously submitted a request to the Oil and Gas Authority for an extension to P1929 and P2304, both of which would otherwise expire at the end of November, and on Monday the board said it was hopeful of receiving confirmation from the authority in respect of those extensions "in the near future".
Despite entry into the agreement, the company cautioned that no assurance could be provided that a commercial transaction would ultimately be concluded with the counterparty.
"We are delighted to have agreed exclusivity with a large internationally recognised exploration and production company as our preferred partner for Resolution and Endeavour," said Egdon managing director Mark Abbott.
"In our view, the calibre of the proposed partner reflects the upside potential associated with these assets and validates our strategy to add them to our portfolio."
Abbott said the development represented a "major step forward" for the projects, and had resulted from the "significant" work undertaken by the team over a prolonged period.
"We look forward to working closely with the counterparty to progress negotiations and due diligence and will of course update shareholders on progress in due course."
As at 1048 GMT, shares in Egdon Resources were down 27.46% at 3.16p.
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