LONDON (Alliance News) - Union Jack Oil PLC Monday said it has joined a string of other AIM-listed companies on the PEDL143 licence in southern England, which hosts the Holmwood prospect, after signing a deal to acquire a stake in the project by partly funding future work programmes.
Fellow UK-listed companies Europa Oil & Gas, UK Oil & Gas Investments PLC and Egdon Resources PLC are already working on the licence alongside unlisted parties Warwick Energy Exploration Ltd and Altwood Petroleum Ltd.
Union Jack has signed a deal with Europa to acquire a 7.5% economic interest in the licence, and Union Jack will not pay any upfront costs for transaction.
Instead, Union Jack will fund 15% of the total costs of drilling the Holmwood-1 exploration well. The total cost is expected to be around GBP3.2 million, meaning Union Jack would contribute GBP480,000.
If the cost of the well goes above that total cost of GBP3.2 million, then Union Jack will contribute 7.5% of any additional cost overruns.
Should a commercial discovery be made at the licence and it is then subsequently developed, Union Jack will pay Europa GBP159,375 to pay for previous expenditure made by Europa. Importantly, any back costs made to Europa will be funded from the net proceeds received by Union Jack from production derived from the licence.
Union Jack said it will fund the deal and work using existing cash resources.
Holmwood lies only 12 kilometres to the west of the well-known Horse Hill project near Gatwick Airport which is operated by numerous London-listed companies, including some that are involved in the Holmwood licence.
Europa released its own statement confirming the deal with Union Jack Oil, stated the Holmwood exploration well will penetrate "similar stratigrapghy" to Horse Hill, which managed to produce around 1,688 barrels of oil per day under flow test conditions.
Following the completion of the deal, Europa will hold a 32.5% stake in Holmwood, UK Oil & Gas will hold a 30% stake, Egdon will retain an 18.4% stake and Union Jack will have its 7.5% interest. Warwick Energy will hold 10% whilst Altwood will own the remaining 1.6% stake in the licence.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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