LONDON (Alliance News) - UK Oil and Gas Investments Monday said it has signed a farm-in agreement with Egdon Resources UK Ltd to acquire a 20% interest in the PEDL143 UK onshore licence in the Weald Basin next to the Horse Hill licence.
The license is operated by Europa Oil and Gas (Holdings) PLC with a 40% stake. Following the deal, Egdon will hold a 18.4% stake and the balance will be owned by Altwood Petroleum and Warwick Energy.
Under the agreement, UK Oil will pay 40% of the costs to drill the Holmwood-1 well on the licence, capped at GBP1.2 million. The total well cost is expected to be around GBP3.0 million. If costs exceed that, then all the companies will pay their contribution based on their shareholding in the license.
"We are pleased to have concluded this deal with UKOG within their core business area. The transaction means that should planning consent be granted for the well, Egdon will retain a material interest in the Holmwood Prospect whilst minimising the company's financial exposure," said Egdon.
The licence is to the immediate west of Horse Hill licence, which caused a stir after an initial oil discovery earlier in 2015. The latest results from Horse Hill estimate the total Jurassic shale plus tight conventional reservoir section now stands at 9.24 billion barrels of oil in place but a flow test is still needed.
That estimate also excludes a further upper portland sandstone reservoir estimate, which could home a further 21.0 million barrels of oil initially in place.
"The opportunity to increase our interests in the Weald Basin adjacent to Horse Hill and to participate in the drilling of Holmwood's potentially significant low to moderate risk prospective resources is both exciting and a logical growth step in the company's core business area," said UK Oil.
UK Oil shares were down 4.9% to 2.05 pence per share on Monday morning, whilst Egdon shares were down 0.3% to 16.20p. Europa shares were down 1.6% to 7.50p.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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Uk Oil & Gas (UKOG)
Europa Oil & Gas (EOG)