UK Oil & Gas PLC (London AIM: UKOG) is delighted to announce that its subsidiaries UKOG (137/246) Ltd (UKOG 100% interest) and Horse Hill Developments Ltd ("HHDL", UKOG 77.9% interest) have executed a conditional binding term sheet ("Agreement") with LSE main board listed Pennpetro Energy plc ("PPP"), whereby PPP will farm-in to the Horse Hill Oil Field ("Horse Hill") on an incremental production basis via funding the acquisition of 3D seismic and the drilling of the next infill production well. UKOG holds an 85.635% net interest in Horse Hill and the surrounding 142.9 km² PEDL137 and PEDL246 licences ("Licences") located about 2 km north of Gatwick airport.
Farmout Highlights:
· PPP to fund 100% of a new crestal infill production well, designated Horse Hill-3 ("HH-3"), to be spudded after the completion of a PPP 100% funded ~12 square km high-definition 3D seismic survey (the "Farmout Programme"), subject to an aggregate cap of £4.6 million.
· Upon Farmout Programme completion, PPP will earn a 49% share of any oil production from HH-3. PPP will also earn an aggregate 49% non-operated Licences interest, comprised of an initial 7% on 3D seismic completion and a further 42% interest upon HH-3 completion.
· UKOG and HHDL will retain 100% ownership and rights to all oil production and revenues from Horse Hill-1 ("HH-1"). UKOG will remain as the Horse Hill and Licences operator.
· The assignment of the aggregate 49% Licences interest to PPP is subject to PPP providing the necessary funds to drill HH-3 and complete the Farmout Programme within six-months from the completion of the 3D seismic which is at its discretion.
· Subject to farmout completion, UKOG's interest in HH-1 production will remain at 85.635% and its net interest in any HH-3 production and the Licences will be 43.67%.
· The farmout to PPP is subject to the completion of a formal Farmout Agreement between the Parties, formal consent by each Parties' respective boards, the full consent of all HHDL's shareholders and regulatory consent from the North Sea Transition Authority for any Licences interest assignment.
· Post Farmout Completion, each Licences participant will bear and pay cash calls pro rata to their respective interest in the Licences.
· Planning and environmental consents remain in place for a further 4 production wells at Horse Hill.
· 3D seismic acquisition is currently targeted for H2 2023.
Stephen Sanderson UKOG's Chief Executive commented:
"This mutually advantageous transaction will inject new activity into Horse Hill, aiming squarely to deliver increased production and revenues from the oil field. The farmout enables UKOG to move this asset forwards without the need to raise capital, enabling our resources to be firmly focussed upon the appraisal and development of the Loxley gas discovery, our most material petroleum asset. We look forward to a close working relationship with Pennpetro and a mutually successful future at Horse Hill."
