Angus Energy, a conventional oil and gas production and development company, has entered into a definitive agreement to form a new partnership with Cuadrilla Balcombe ('Cuadrilla') and Lucas Bolney('Lucas'). Subject to satisfaction of the terms of the agreement, the Company will join the partnership through the acquisition of a 25.0% interest in licence PEDL244 which includes the entire Balcombe field discovery.
On behalf of the partnership, Angus Energy will, subject to Oil and Gas Authority ('OGA') approval, assume Operatorship of the Balcombe licence. The Company will commence a fully approved well test program of the Balcombe-2Z horizontal well at the earliest opportunity. Angus Energy will also establish a local Community Liaison Group and contact local residents, at the appropriate time, before work commences.
Under the terms of the agreement, Angus Energy will pay a cash amount in two parts as set out below along with the costs of the well test program of Balcombe-2Z. If the results of the well test are determined successful, the Company will assume the associated costs of a Field Development Plan ('FDP') submission to the Oil & Gas Authority ('OGA').
The Acquisition has been unanimously approved by the Board and will require additional sources of capital. Accordingly the Board is reviewing several financing options and is in the final stages of selection. An update will be provided in due course.
All operations at Balcombe will be performed through conventional production. There will be no hydraulic fracturing or 'fracking'.
Terms of the Acquisition
Under the terms of the Acquisition, Angus Energy Weald Basin No.3 Limited, a wholly owned subsidiary of Angus Energy, has conditionally agreed to acquire the 25% interest in PEDL244 on a pro-rata basis from Cuadrilla and Lucas (the Sellers) on the following terms. The current ownership of PEDL244 is 75% Cuadrilla and 25% Lucas:
Pay within 20 working days of 20 January 2018 £2,000,000 less £150,000 already paid under a confidentiality agreement with the Sellers;
Pay £2,000,000 following consent from the OGA for the Acquisition; and
Carry out and pay for the well test of a horizontal well test program of the Balcombe-2Z (the "Well") to achieve the following objectives:
o Measure the Well flowing production rates for oil and natural gas;
o Measure flowing bottom hole and wellhead Well pressures;
o Determine the gas oil ratio (GOR) of production from the Well;
o Collect and analyse Well oil, gas and water samples; and
o Measure and record Well shut-in bottom hole pressure over approximately one month.
Should the OGA not approve the Acquisition, the initial £2.0 million payment is refundable.
The Company notes a fully approved test program of Balcombe-2Z Well will require minimal preparation as the Well is drilled and ready for testing.
PEDL244 has been operated on a care and maintenance basis since 2013 with no production and limited costs. There are no assets, other than the Licence interest, associated with the Acquisition and the only liability is a restoration liability estimated at a gross amount of circa £200,000.
The Partnership of licence PEDL244 assuming completion of the Acquisition and following consent by the Oil & Gas Authority would be as follows: Cuadrilla Balcombe 56.25%; Angus Energy 25.00%; Lucas Bolney 18.75%.
Paul Vonk, the Company's Managing Director, commented: 'This transaction complements our existing asset base and aligns with our goal of enhancing shareholder value. This joint venture is an important milestone as we execute our business plan. Both the new partnership and Cuadrilla's and Lucas' recognition of Angus Energy's ability to manage and execute operations in a safe and efficient manner at Balcombe are gratifying to our entire team.
We are also looking forward to the near term testing of Balcombe-2Z horizontal well as it will further add to our knowledge base and understanding of the Kimmeridge layers.'
Francis Egan, CEO of Cuadrilla, said: 'Following the approval of our planning application to flow test and monitor the existing horizontal exploration well at Lower Stumble we are delighted to form this new partnership with Angus Energy, an existing and successful operator in the area. This agreement will enable the testing works to be undertaken in a timely way and to the highest standards, whilst we continue to also focus on our shale gas operations in the North West.'