LONDON (Alliance News) - Egdon Resources PLC and its partners Thursday announced an opt-in agreement with Total E&P UK Ltd for its UK exploration and development licence PEDL209 in Lincolnshire.
The onshore hydrocarbon exploration and development company said that under the terms, the subsidiary of major oil and gas company Total, will have an option to earn a 50% interest in the PEDL209 licence until December 31 2015.
In return, Total would pay 100% of the exploration programme of up to GBP13.47 million including seismic acquisition and the drilling of a well.
Under the agreement, Egdon would continue to be the operator of the site, which holds both conventional and unconventional well drilling opportunities, while Total would become operator following the work programme.
As consideration for granting of the option, Total will make a non-refundable cash payment totalling GBP1.5 million, with Egdon receiving GBP918,015 subject to certain approvals.
The current licence interests in the site are Egdon with 60%, Blackland Park Exploration Ltd with 28% and Stelinmatvic Industries Ltd with 12%. Following the completion of the deal Egdon will hold 30%, Blackland will hold 14%, Stelinmatvic will hold 6% and Total will hold 50%.
The licence covers an area of 64 square kilometres and is located next to the PEDL139/140 licences, where both Egdon has interests.
Total announced earlier this month that it had signed an agreement for 40% interest in the PEDL139/140 sites for USD1.6 million in back costs to the partners and the funding of a work programme of up to USD46.5 million, with a minimum commitment of USD19.5 million.
The decision by Total will make it the first oil and gas major to back UK fracking, a move which could drastically improve the process in the UK. Total is expected to invest as much as GBP30 million in fracking exploration in the East Midlands.
Hydraulic fracturing, otherwise known as fracking, involves extracting gas trapped in shale by pumping in pressurised water and chemicals.
In the US, fuel prices have falling sharply as fracking has become commonplace across such states as North Dakota and Mississippi.
However, so far in Europe fracking has had mixed results - often being either controversial or unreliable. In the UK, there have been major protests against the method, which critics fear will pollute water tables in rural areas and may cause small earthquakes.
Additionally, in countries where it has been properly tested across Europe, it is still unproven. In Poland, EU regulation changes and lower revisions of shale reserves have led to mixed sentiment regarding fracking operations.
Exxon Mobil Corp. has already decided to abandon its Polish shale operations, although other global players, such as US majors Chevron Corp. and ConocoPhillips, remain determined to extract shale gas in Poland.
Egdon shares were up 9.5% to 29.28 pence, putting it in the top ten AIM movers Thursday.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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