LONDON (Alliance News) - Alba Mineral Resources PLC and Regency Mines PLC both said Friday they signed deals to each acquire 5% stakes in Horse Hill Developments Ltd, which operates in the UK Weald Basin just south of London, for a cash payment of GBP300,000 each.
Alba Mineral Resources shares almost tripled to 0.810 pence on the news, putting it top of the AIM All-Share risers, while shares in Regency Mines - which also is a shareholder in Alba - increased 20%, putting it just behind as the third biggest AIM All-Share risers.
Both of the companies, which are making their first investments in oil and gas, have signed binding heads of agreement with initial deposits of GBP10,000 and a payment of GBP40,000 on completion, before GBP250,000 each is paid in line with the cash calls linked to drilling of the Horse Hill-1 well.
The Horse Hill-1 well is scheduled to be completed by the end of August, testing several conventional stacked oil and gas targets in the proven productive Portland Sandstone, Corallian Sandstone and Great Oolite Limestone levels of the prospect.
Horse Hill Developments Ltd has the right to acquire a 65% participating interest and operatorship of the UK licence PEDL 137 and participates in the Horse Hill-1 well with Magellan Petroleum Corp, which has 35% interest in the well.
Alba Mineral Resources added that the site construction has now started for the 2,594 metre Horse Hill-1 well, and the well should start being drilled later this month.
"We are very pleased to have secured an investment in this highly prospective conventional onshore oil and gas exploration project in the UK," Alba Chief Executive Michael Nott said in a statement. "The next six months should be an exciting time for the company with the drilling of the Horse Hill-1 well.
Regency Mines said in a statement that it made the decision to invest in Horse Hill after Alba's investment, and noted that it has a 14.87% stake in Alba and so has a greater overall interest in the Horse Hill development.
"While a relatively small financial commitment at this stage, the Regency board believes that this strategic shift will help unlock value for Regency amidst challenging market conditions in the mineral resource sector," Chairman Andrew Bell said in a statement.
The move represents a strategic shift for both companies into oil and gas investments and after Alba struggled with some of its mineral operations in the past year.
Alba Mineral Resources, which generally focuses on uranium exploration in Mauritania has been looking for new acquisitions after noting in April that, without further fund raising, it may struggle to carry out its exploration activities.
Alba Mineral Resources added in April that its Mauritania licence expires in May 2015 ,and there is uncertainty over whether the licence will be renewed or extended beyond that point, which could lead to the GBP556,293 carrying value of the asset becoming impaired.
"By co-investing with Alba, Regency supports Alba in its strategic re-launch into the oil and gas space," Bell added. "Regency increases its exposure to the potential upside of the project while minimizing downside risk and total cost, offering Regency investors access to near-term cash generation and an increase in the liquidity of its existing investment in Alba."
Co-investors in Horse Hill Developments Ltd besides Alba and Regency, include Angus Energy Ltd, Solo Oil PLC, Doriemus PLC, Stellar Resources PLC and UK Oil & Gas Investments PLC.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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