Edgon gets extension to Shell farm-out licences

Egdon Resources updated the market on UK offshore licences P1929 and P2304 on Monday, as well as the farm-in agreement with Shell UK.

The AIM-traded firm had previously indicated that the farm-in by Shell was conditional on receiving approval from the Oil & Gas Authority (OGA), and the agreement of a mutually-acceptable forward work programme and timeline with the OGA.

In December, Egdon announced that the OGA had granted extensions to the licences to 31 May.

On Monday, Egdon said the OGA had now agreed to extend the licence terms further, and amend the work obligations for both P1929 and P2304.

It said the initial term of the licences would be extended to 31 May 2024; subject to fulfilling some firm commitments, including that by 31 May 2021, it would acquire 400 square kilometres of 3D seismic in P1929 and P2304, or relinquish the licences.

Following that, by 30 November 2022, it would undertake to drill one well in either P1929 or P2304 to a depth of 1700 metres true vertical depth subsea, or 75 metres below the base Permian unconformity; or also relinquish the licences.

Egdon said it would now progress the assignment of the licence interests and operatorship of the licences to Shell.

On completion, Egdon would retain a 30% interest in the licences.

Under the terms of the farm-in agreement, Shell would pay 85% of the costs of the acquisition and processing of the 3D seismic survey, covering both the Resolution and Endeavour gas discoveries.

The carry on the acquisition costs would be capped at $5m gross, beyond which Egdon would pay 30% of the survey costs.

Additionally, Shell would also pay 100% of all studies and manpower costs through to the well investment decision on the licences.

“Working closely with our partner Shell, we are pleased to have reached agreement with the OGA to extend the licences coupled with revised work obligations and timelines,” said managing director Mark Abbott.

“We will now focus on completing the licence assignments and transfer of operatorship to Shell and progressing the planned appraisal activity on the Resolution and Endeavour gas discoveries.”

Abbott said the first part of the work programme would be the acquisition of a marine 3D seismic survey.

“We look forward to building on our close working relationship with Shell and benefitting from their substantial worldwide operational experience and expertise; notably the development of carbonate reservoirs characteristic of the Resolution and Endeavour discoveries.”

At 1009 BST, shares in Egdon Resources were up 0.95% at 2.12p.