LONDON (Alliance News) - Alba Mineral Resources PLC Friday said it has reached a deal to increase its stake in the Horse Hill project near Gatwick Airport in the UK and struck a separate deal to acquire a stake in the Brockham oilfield.
The Horse Hill project in the Weald basin is being developed by numerous London-listed oil companies and is thought to have around 10.99 billion barrels in place, yet there remains serious questions over how much of that oil can be recovered.
Horse Hill Developments Ltd owns a 65% stake in the Horse Hill prospect and the remaining 35% of the prospect is held by Magellan Petroleum Corp.
On Friday, Alba said it will acquire the 5% stake held in Horse Hill Developments by Angus Energy Ltd, which will up Alba's stake in Horse Hill Developments to 15% from 10%.
In return, Alba will issue Angus Energy with 137.7 million Alba shares.
Alba also has secured the option to acquire another 5% stake in Horse Hill Developments from Angus Energy. Alba can execute the option within 21 days of the deal being finalised and that would increase its stake in Horse Hill Developments to 20% from 15%.
For that additional stake, Alba will pay Angus GBP365,000 in cash, of which it will pay GBP90,000 immediately with the remainder being paid once the deal is finalised.
If the deal is completed and Alba exercises its option to up its stake by 10% in the Horse Hill project, it will own 20% of Horse Hill Developments.
UK Oil and Gas Investments holds a 30% stake in Horse Hill Developments, whilst Doriemus PLC, Stellar Resources PLC, Solo Oil PLC each hold 10% stakes in Horse Hill Developments, with Evocutis PLC holding a 2% stake. Some private companies hold the remaining balance.
UK Oil and Gas Investments holds a 6% stake in Angus Energy.
The latest 10.99 billion barrel estimate for Horse Hill was provided by Schlumberger and covers a 55 square mile area over the PEDL137 and PEDL246 Horse Hill licenses. Of the estimate, 8.26 billion barrels is thought to lie in the Kimmeridge Clay formation, 1.71 billion barrels in the Lias formation, and 1.01 billion barrels in the Oxford Clay.
Although the figure is the largest of all the independent reviews carried out, the amount of oil that can actually be recovered is still unknown.
In May, the companies said the PEDL137 license, part of the Horse Hill project has the "potential production period of 19 years", but also that only between 3% to 15% of the oil in place at Horse Hill is ever likely to be recovered.
The companies will now press ahead with a flow test on the Horse Hill-1 well, whilst also evaluating those deeper Jurassic tight oil plays to see if this can further increase the amount of oil in place.
Separately on Friday, Alba has also secured another option to acquire a 5% stake from Angus in the production licence 235, which contains the Brockham oilfield. That option is at a "two for one promote" basis, such that if Alba elects to exercise the option, it must fund 10 % of the cost of the well from first oil in order to earn its 5% interest.
For the stake in the Brockham field, Alba will issue Angus with 45.9 million warrants in the company at a price of 0.5 pence per share, which can be converted within 18 months of the deal being finalised.
"The option we have to acquire a direct 5% interest in the producing Brockham oil field represents a further opportunity to significantly increase our involvement in the Weald Basin," said Alba Chief Executive Mike Nott.
Alba shares were up 4% to 0.390 pence per share on Friday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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