(Alliance News) - Egdon Resources PLC on Monday said it has exercised its farm-in option for the onshore production licence PL081 in the UK North Sea under its agreement with York Energy (UK) Holdings Ltd in early February.
The Gloucestershire, England-based oil and gas explorer and producer also said it and York Energy signed an agreement with Cuadrilla North Cleveland Ltd, the 100% licensee of PEDL347, which would result in a farm-in and "equalisation" of interests between the two licences.
Egdon said it completed the reprocessing and interpretation of 214 kilometres of 2D seismic data for PL081 during the six-month option period with York Energy. This was alongside further technical and operational studies "which have de-risked the opportunity and confirmed a material, commercially viable prospect".
The PL081 and PEDL347 licences contain the Weaverthorpe prospect, Egdon said which is a "shallow ([around] 1,000 metres) Sherwood Sandstone (Triassic) conventional prospect located immediately up-dip of interpreted gas pay in the Fordon-2 well", which was drilled by BP PLC in 1974.
Regarding the agreement with York Energy and Quadrilla, Egdon said both licences would be assigned to Egdon with a 52.5% stake, Cuadrilla at 25% and York at 22.5%. Following recovery of Egdon's costs of the farm-in, Egdon said it will assign a further 2.5% interest in both licences to York.
Egdon will be be appointed as the operator of both licences, it said. It will also pay 100% of the costs associated with the planning, drilling and logging.
This is alongside either short term testing and completion, or plugging and abandonment, of a well to optimally test the Weaverthorpe prospect within the licences. Egdon will have a period of three years to complete this.
"Our technical, commercial and operational due diligence has confirmed our previous view that Weaverthorpe is a robust and commercially attractive conventional gas prospect, spanning the PL081 and PEDL347 licences. This has triggered the exercise of the option on PL081 and an agreement with Cuadrilla in respect of PEDL347, which when concluded, will cover the entire prospect area and allow the optimal appraisal and development of Weaverthorpe on behalf of the new joint venture," said Egdon Managing Director Mark Abbott.
"Indigenous gas resource like Weaverthorpe provide local employment and generate taxes whilst having compelling environmental and security of supply benefits by reducing the UK's increasing reliance on imports of [liquefied natural gas] which carry significantly higher pre-combustion emissions. Producing gas from Weaverthorpe would be fully aligned with the government's energy security strategy and net zero targets.
"We look forward to working with York, Cuadrilla and our wider stakeholders on delivering the planned work programme over the coming period."
Shares in Egdon were down 2.3% to 4.20 pence each in London on Monday afternoon.
By Greg Rosenvinge, Alliance News reporter
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