Europa Oil & Gas Holdings Plc (LON:EOG) has agreed a further farm-down of its stake in the soon-to-come-online Wressle oil field in Lincolnshire.
It is selling a 10% stake in the asset to Upland Resources Ltd (LON:UPL) in return for £1.85mln, with an initial £1.3mln coming in cash and £600,000 in Upland shares.
Europa will be left with 20% of the field which is due to start producing 500 barrels of oil per day in early 2017. It means the company will have 100 bopd of net production from Wressle, taking its overall output to 220 bopd.
The company intends to use the cash to support ongoing exploration efforts, comprising Holmwood in the UK and its portfolio of prospects offshore Ireland.
Europa’s remaining stake in Wressle is valued at £3.7mln by this latest deal.
Hugh Mackay, Europa chief executive, said: “Europa is delivering on its strategy to actively manage its portfolio and realise value for shareholders.”
“The £1.3 million cash consideration from this transaction together with the £0.6 million cash consideration received from the previous sale of Wressle to Union Jack will be used to fund ongoing exploration in the UK and Ireland including drilling the Holmwood well during 2017, which we rate as one of the best undrilled conventional prospects onshore UK.”
He added: “Europa holds a portfolio of high quality exploration licences in both onshore UK and offshore Ireland. We continue to advance and monetise our multistage portfolio of licences, and in the process generate value for our shareholders.
“It is public knowledge that we are in the process of farming out in Ireland where any one of our seven licences and licensing options has the potential to be a company maker for Europa. Whilst we do not provide running commentaries on farmout activity the market should feel assured that we are talking to the right parties and seeing strong interest.
“The recent series of transactions in the UK demonstrates that we are both active in the market and capable of closing deals on attractive terms.”
House broker finnCap said: "We view this derisking of the portfolio and balance sheet strengthening positively.
"The new cash can be used to progress the new Irish licences to allow for future farm-outs. The company continues to work hard to secure a new partner offshore Ireland as well as at Holmwood, both of which could lead to new drilling in the portfolio." It targets 25p a share.
Shares added 2.78% to 4.625p.