Shell Farms into UK Cluff LIcences
UK southern North Sea focused explorer Cluff Natural Resources has signed a conditional farm out agreement and a three-month exclusive option with Anglo-Dutch major Shell for its wholly owned Licences P2252 and P2437, it said February 8.
Cluff CEO Graham Swindells said the partnership was "a clear endorsement of the quality of the licences in our portfolio and demonstrates the Cluff technical team’s ability to identify and transform overlooked or less understood opportunities."
He said both parties shared the commitment to further development in the Southern North Sea and "most importantly, we now have direct visibility over the route to future drilling activity, and the potential to create further significant value for shareholders."
Shell said the deal "is consistent with our strategy to continually reshape and high-grade our portfolio. We look forward to partnering with Cluff on these licences and applying our extensive exploration expertise to help develop this [sic] highly promising gas prospect in the Southern North Sea.”
Shell will acquire a 70% working interest and the operatorship of Licence P2252, and pay all the costs of an agreed forward work programme to the earlier of 31 December 2020 or the date on which a well investment decision is made. That will include 400 km2 of new broadband 3D seismic data over the Pensacola prospect in the summer of 2019 and processing new and existing seismic data and sub-surface studies to support a well investment decision before the end of 2020. Pensacola has unaudited estimated gas initially in place (GIIP) of 566bn ft3.
Completion of the farm out is conditional on the entering into of a joint operating agreement and regulatory consent from the Oil & Gas Authority, subject to a six-month backstop.
Cluff has granted Shell the option to buy half of Licence P2437 by 30 April 2019 and if it exercises it then it will pay all the costs to date, up to $600,000 which is comprised of an initial payment and a further payment upon completion.
If a decision is taken to drill an exploration well on P2437, Shell will pay a share in the proportion of 1.5:1 of that and the well test subject to an aggregate cap of $25,000,000. Shell would therefore pay 75% of costs up to a total of $25,000,000. Any cost over-runs associated with the well above this level are to be satisfied by each party in proportion to their working interest.
P2437 contains the Selene prospect which is estimated to contain unaudited mean GIIP of 509bn ft3 and is next to Shell-operated infrastructure associated with the Barque gas field.