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    UK's Egdon Secures North Sea Farm-in Partner


Shell will take a 70% stake in the two gas discoveries and serve as their operator, in return for covering the majority of pre-drill costs.

by: Joseph Murphy

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UK's Egdon Secures North Sea Farm-in Partner

UK junior Egdon Resources announced on January 21 it had signed a deal to farm out stakes in two North Sea gas discoveries to Shell.

Shell is set to take a 70% interest in the P1929 and P2304 licences, containing the Resolution and Endeavour gas discoveries, and also serve as their operator, Egdon said in a statement. Egdon will be left with a 30% share in the projects.

Under the deal, Shell will pay 85% of the cost of acquiring and processing a 3D seismic survey covering both discoveries, up to a $5mn threshold. Once this threshold is reached, its share of costs will fall to 70%.

The Anglo-Dutch major will also cover 100% of study and manpower costs up to an investment decision being made on drilling a well.

“This transaction validates our views on the potential of these blocks and introduces a highly experienced and respected operator to progress appraisal activity on the Resolution and Endeavour gas discoveries,” Egdon managing director Mark Abbott commented. “In difficult market conditions Egdon has secured a substantial carry on costs to the well investment decision whilst retaining a material 30% interest in the licences.”

The partners will now agree a forward work programme for the licences with the Oil and Gas Authority (OGA) – a precondition for the government’s approval of the farm-in.

The Resolution field, first discovered in 1966, has been assessed by Schlumberger to hold 231bn ft3 of gas in contingent resources. Endeavour meanwhile holds a further 18bn ft3.

The OGA granted Egdon six-month extensions for P1929 and P2304 in late November, conditional on it securing a farm-in partner.