LONDON (Alliance News) - Union Jack Oil PLC Tuesday said it has reached agreement with fellow AIM-listed Egdon Resources PLC to acquire a 10% interest in the PEDL005 license in Lincolnshire, England, which includes the producing Keddington oilfield.
Both companies released separate statements confirming the deal, which will lead to Union Jack earning a 10% stake in the license from Egdon. In return, Union Jack will pay 20% of the costs of a new sidetrack Keddington well which will be drilled in the fourth quarter of 2015.
Union Jack will also pay 20% of the costs for the proposed Louth-1 exploration well which will be drilled in either 2016 or 2017. Union Jack said it would fund the costs of the two wells from existing resources.
"The acquisition complements the company's existing activities in north east UK in respect of Wressle, Biscathorpe and North Kelsey and adds a further two wells to Union Jack's current drill-ready portfolio," said the company in a statement.
Keddington has produced in excess of 300,000 barrels of oil to date and is currently producing approximately 30 to 35 barrels of oil per day gross with associated gas from two wells, Keddington-4 and Keddington-3Z.
Following the deal, Egdon Resources will hold a 45% stake and remain as operator of the Keddington field, with Union Jack holding its 10% stake. Terrain Energy Ltd will hold a 35% stake and Nautical Petroleum Ltd will hold the remaining balance.
"These two transactions are designed to optimise the balance of risk and reward for the company in the exploration and development of PEDL005 reducing the company's financial exposure to these upcoming wells," said Egdon Managing Director Mark Abbott.
"In the case of Keddington. this would now see Egdon paying only 15% of the costs of the new appraisal/development well but retaining 45% of the field's production," Abbott added.
"The board believes this acquisition to be a natural next step in respect of our strategy as Union Jack transitions from an exploration company to a production company with the prospect of increased production should the new Keddington side-track well," said Union Jack Chairman David Bramhill.
Union Jack shares were trading flat on Tuesday morning at 0.220 pence per share whilst Egdon shares were up 1.8% to 13.10 pence per share.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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