Orcadian Energy PLC (AIM:ORCA) shares jumped 20% higher as it told investors it has entered a non-binding agreement with a potential farm-in partner for its new project in the UK’s southern North Sea.
The identity of the potential partner was not disclosed.
It now has a period of commercial exclusivity to nail down terms for the partnership, and, in the meantime, it can borrow $1.4 million from an affiliate of the partner.
The project, which includes the Earlham discovery, is estimated to contain 114 billion cubic feet of gas, as well as the decommissioned Orwell gas field and the Clover exploration prospect.
The initial agreement envisages the new partner will cover all development and licence costs until the first gas production.
"We have been approached by a partner that shares our vision of developing Earlham,” chief executive Steve Brown said in a statement.
“We have been very impressed with the maturity of our potential partner's concept and are keen to explore this and other opportunities to work with them."
The $1.4 million loan is intended to be settled from cash payments included in an eventual deal, and, if a farm-out is not concluded the loan will carry interest at a rate of 6%.
Orcadian said it will use the loan proceeds to repay an outstanding debt to Shell.
The shares were changing hands for 12.28p, up 2.03p.