Egdon Near to Closing North Sea Farm-outs to Shell
London-listed junior Egdon Resources reported on June 8 it had received licence extensions for two North Sea gas discoveries, bringing it closer to completing the farm-out of stakes in the finds to Shell.
Egdon agreed in January to transfer 70% interests in and operatorship of licences P1929 and P2304, containing the Resolution and Endeavour gas discoveries, to Shell. The deal was conditional on securing approval from the Oil and Gas Authority (OGA) and a work programme and timeline being agreed with the government agency.
The OGA has now agreed to extend the licence terms and amend the work obligations, Egdon said in a stock exchange filing. Both licences will be extended from May 31 2020 until May 31 2024. By May 31 2021, the partners will be required to gather 400 km2 of 3D seismic data and by November 30 2022, commit to drilling at least one 1,700-metre well.
Egdon 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," the company's managing director Mark Abbott said in a statement.
Under the deal, Shell will cover 85% of the cost of acquiring and processing the 3D seismic survey up to a limit of $5mn. Once this threshold is reached, its share will fall to 70%. The Anglo-Dutch major will also pay for 100% of study and manpower costs up to an investment decision being made on the well.
"We look forward to building on our close working relationship with Shell and benefiting from their substantial worldwide operational experience and expertise; notably the development of carbonate reservoirs characteristic of the Resolution and Endeavour discoveries," Abbott said.
The Resolution field, first discovered in 1966 by France's Total, has been assessed by Schlumberger to hold 231bn ft3 (6.54bn m3) of gas in contingent resources. Endeavour meanwhile holds a further 18bn ft3.