Oil major Shell has signed a farm-in agreement to acquire 70 percent of Egdon Resources’ P1929 and P2304 licenses offshore the UK.
Egdon said on Tuesday that its UK subsidiary currently holds a 100 percent interest in both licenses, and would retain a 30 percent non-operated interest following Shell’s farm-in. Shell will also be appointed as the license operator.
It is worth noting that licenses P1929 and P2304 contain Resolution and Endeavour gas discoveries, respectively.
As consideration, Shell will pay 85 percent of the costs of the acquisition and processing of a 3D seismic survey covering both the Resolution and Endeavour discoveries with the carry on the acquisition costs capped at $5 million gross, beyond which it would pay 70 percent of the costs.
Shell will also pay 100 percent of all studies and manpower costs up to a well investment decision on the licenses.
Egdon added that the farm-in was conditional upon approval from the Oil & Gas Authority (OGA) and an agreement of a mutually acceptable forward work program and timeline with the OGA.
In December 2019, OGA granted extensions for the licenses to Egdon until May 31, 2020, subject to securing a farm-in agreement by January 31, which this agreement fulfills, and demonstrating that the licensees are on track to deliver a future program of 3D seismic data acquisition across both licenses, which is in progress.
A competent person’s report prepared by Schlumberger reported mean contingent gar Resources of 231 bcf of gas, with a P90 to P10 range of 100 to 389 bcf, attributable to the Resolution discovery. Additionally, Egdon estimates that the Endeavour discovery contains mean contingent resources of 18 bcf, with a P90 to P10 range of 10 to 28 bcf.
Mark Abbott , managing director of Egdon, said: “We are delighted to have signed a farm-in agreement with Shell in respect of these highly prospective licenses. In difficult market conditions, Egdon has secured a substantial carry on costs to the well investment decision whilst retaining a material 30 percent interest in the licenses.
“Our immediate focus will be to work with Shell to agree on a forward work program and the timeline for the licenses with the OGA. The first part of this work program will be the acquisition of a marine 3D seismic survey to enable a decision on the contingent appraisal well.”