Europa Oil & Gas Holdings Plc (LON:EOG) has agreed to sell a 3.34% interest in the Wressle field to Union Jack Oil PLC (LON:UJO) in a deal valuing the former’s original stake in the project at £6mln.
Union Jack Oil is paying £600,000 in cash for the 3.34% stake and as a result its total interest in Wressle, in North Lincolnshire, rises to 11.67% from 8.8%.
“We consider this transaction to represent a sensible monetisation of part of the asset now it has been largely de-risked, whilst still retaining sizeable exposure to production and upside on the other reservoirs,” said Hugh Mackay, Europa chief executive.
“Importantly, this transaction provides investors with a point of reference for the value of our remaining 30% interest in the licences.”
Europa retains 30% of the project and based on the deal terms its remaining interest is worth £5.4mln, compared to a market capitalisation of around £11.4mln.
Wressle, which is operated by 25% stakeholder Egdon Resources Plc (LON:EDR), is expected to start oil production at a rate of 500 barrels of per day by early 2017.
News of the transaction comes after a new competent person’s report for the field was unveiled on Monday. The third party assessment confirmed the field’s commerciality.
Wressle is being fast-tracked to production following a successful exploration well which achieved excellent flow rates in testing last summer.
Egdon Resources highlighted on Monday that the new estimate - 14.18mln barrels of oil initially in place, of which 2.15mln barrels is considered discovered - had exceeded its expectations.
Egdon managing director Mark Abbott said: “The CPR has independently confirmed the commercial viability of the Wressle field development with overall oil and gas reserves and contingent resources exceeding our original pre-drill estimates.”
Europa’s Mackay, meanwhile, said it would use the money from the Wressle stake sale to fund drilling on the Holmwood project, in south east England, close to the Horse Hill discovery near Gatwick airport.
Holmwood is rated by Mackay as ‘the best undrilled conventional prospect onshore UK’, and he noted that drilling is expected there in 2017 subject to securing permits and permissions.
Highlighting the depth of Europa’s portfolio, he added: “PEDL180 and 182 are just two of a portfolio of licences we hold.
“These include three UK onshore fields which in H1 produced 124 boepd net to Europa; PEDL143 containing the Holmwood prospect in the Weald Basin, which we rate as the best undrilled conventional prospect onshore UK; and seven licences offshore Ireland which we estimate to have gross mean un-risked prospective and indicative resources of more than 4 billion barrels of oil equivalent and 1.5 tcf of gas.”
Europa has a 40% stake in Holmwood, alongside partners which include Horse Hill driller UK Oil & Gas Investments Plc (LON:UKOG).
Pre-drill estimates put the exploration target at 5.6mln barrels, made in 2012, though that does not include the potential in the deeper plays confirmed in the Horse Hill well.
The Horse Hill well last year tested more than 1,500 barrels of oil per day in aggregate from a number of reservoir intervals.