Oil and gas company Deltic Energy has entered into a binding, conditional farm-out agreement concerning five of its Southern North Sea gas licences with Cairn Energy.
Deltic Energy entered the farm-out agreement with Cairn’s wholly-owned subsidiary, Nautical Petroleum Limited. Under the terms of the agreement, Cairn will acquire a 60 per cent interest in each of the P2428 (Cupertino Area) and P2567 (Cadence) licenses and a 70 per cent interest in the P2560 , P2561 , and P2562 licenses located between the Breagh and Tolmount gas fields.
Deltic said on Thursday that it would retain a 40 per cent interest in P2428 and P2567 and a 30 per cent interest in P2560, P2561, and P2562.
Cairn will fund 100 per cent of an agreed work programme for each of the five licenses up to the point of making a drill or drop decision on each licence, which will include the shooting of new seismic data over P2428.
Following the farm-out agreement becoming unconditional, Cairn will pay Deltic an up-front consideration of $1 million by way of contribution towards historic back costs incurred by Deltic across the license areas.
If a drilling decision is made on either P2428 or P2567, which contain the most advanced prospects, Cairn will fund 70 per cent of the costs of whichever well is drilled first, subject to a gross well cost cap of $25 million.
Completion of the farm-out is conditional on entering into a joint operating agreement and obtaining standard regulatory consents from the Oil & Gas Authority. Cairn will become the operator of all five licences following completion.
Graham Swindells , chief executive of Deltic Energy, said: “ This agreement represents the commencement of a wide-ranging partnership with Cairn, whose successful history of opening up new basins is aligned with our exploration-focused strategy.
“ The partnership will result in a significant investment across multiple licenses within Deltic’s strategic Southern North Sea gas exploration portfolio, as we jointly progress the next high impact drilling targets.
“ It provides further endorsement of the quality of the portfolio that our team has developed and also our gas focussed exploration strategy, as we continue to supply our conveyor belt of opportunities and attract the best partners to facilitate potential drilling “.