UK North Sea focused oil and gas company Deltic Energy has entered into a binding, conditional farm-out agreement in relation to five of its gas licences in the Southern North Sea with Cairn Energy.
Cairn will acquire a 60% interest in each of Licences P2428 (Cupertino Area) and P2567 (Cadence) and a 70% interest in each of Licences P2560, P2561 and P2562 which are located between the Breagh and Tolmount Gas Fields.
Deltic will retain a 40% interest in licences P2428 and P2567 and a 30% interest in licences P2560, P2561 and P2562.
Cairn will fund 100% of an agreed work programme for each of the five licences up to the point of making a drill or drop decision on each licence, which will include the shooting of new seismic data over Licence P2428.
Following the Farm Out Agreement becoming unconditional, Cairn will pay Deltic an up-front consideration of USD$1 million by way of contribution towards historic back costs incurred by Deltic across the licence areas.
If a drilling decision is made on either of P2428 and P2567 blocks, which contain the most advanced prospects, Cairn will cover 70% of the expenses of whichever well is drilled first, subject to a gross well ceiling of USD$25 million.
The completion of the farm-out is conditional on the entering into of a Joint Operating Agreement and obtaining standard regulatory consents from the Oil & Gas Authority, subject to a three-month backstop, Deltic said. 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 licences 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.
"We are particularly excited at the prospect of building our partnership with Cairn, a well-funded and highly experienced North Sea operator. Both parties share a commitment to pursuing high impact exploration opportunities in the Southern North Sea and successfully developing these gas prospects."