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(Alliance News) - Orcadian Energy PLC on Monday said it has now reached a conditional deal for the sale of its most important asset, although the group is yet to swing to profit.
Orcadian's shares were down 15% at 14.02 pence each in London on Monday morning.
The North Sea oil and gas developer posted pretax losses of GBP1.2 million for the year ended June 30, down from GBP1.6 million year on year.
Orcadian also confirmed the execution of a conditional sale and purchase farm-out agreement with Ping Petroleum PLC. The agreement will see Ping acquire an 81% operating interest in Orcadian's Pilot field licence.
Pilot, the field with the largest reserves in Orcadian's portfolio, was described by the company as "one of the most exciting oil development projects on the UK continental shelf."
Orcadian previously said that the total consideration for the sale, which will leave it with with an 19% stake in the Pilot licence, would bring in USD3.1 million, plus the payment of historic costs incurred by Orcadian to date.
The deal comes with a two year extension to the second term of the pilot licence, provided the transaction is completed by the end of 2024's first quarter.
The group also secured GBP500,000 in equity through the issuing of 3.6 million new shares at a price of 14 pence each, approximately a 15% discount to the company's closing price of 16.5 pence on Friday.
The investors will also receive the option to subscribe for one ordinary share in Orcadian at the price of 25 pence each.
According to Orcadian, these proceeds will go towards "ongoing short term working capital and the costs involved in the progression of the sale and purchase agreement with Ping Petroleum."
New shares are expected to be admitted for trading on AIM around January 5.
In terms of gearing, Orcadian still needs to raise funds to repay a GBP1.0 million loan entered into in July 2019 with Shell International Trading and Shipping Company Ltd.
As of June 30 2023, Orcadian owes GBP991,339, the repayment date of which has been extended to March 13 2024.
The company has also made three license applications for gas and oil opportunities in the North Sea. The results of these applications will be published in the first quarter of 2024.
The group also identified "significant upside appraisal opportunities" at the Elke and Narwhal fields, in which it holds a 100% interest, following seismic attribute analysis conducted by TGS.
Orcadian Chief Executive Officer Steve Brown said: "We close the calendar year of 2023 with real satisfaction that we have signed an SPA with Ping and we look forward to progressing this deal in Q1 2024, with shareholder approval, and to potentially taking the Pilot project forward under their new leadership. The Elke and Narwhal asset definition has been much enhanced by recent seismic work which we intend to build upon to maximise value from these assets."
By Hugh Cameron, Alliance News reporter
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