Egdon Resources LON:EDR has agreed a farm-out deal with Union Jack Oil (UJO) for an interest in PEDL182 located in Lincolnshire and immediately north and adjacent to PEDL180.
UJO will earn an 8.33% WI in PEDL182 in return for paying c12.5% of the cost of a future exploration well to evaluate the Broughton North prospect and will also pay associated back costs of c£64k. This is further to the deal UJO completed in May 2013 whereby it earned an 8.33% WI in PEDL180 and the part of the Wressle-1 exploration well and the part of the Wressle-1 discovery that extended into PEDL182. EDR will remain as operator and retain a 25% WI in both PEDL182 and 180.
This is in line with EDR’s strategy of reducing its risk to exploration projects whilst still retaining exposure to upside in these projects. We value the Broughton Nprth prospect at 0.3p/sh and retain our BUY recommendation and 38p TP.
Independent Oil & Gas LON:IOG
Independent Oil & Gas LON:IOG has announced it has signed an SPA with Verus Petroleum to acquire its subsidiary Oyster Petroleum. The acquisition remains conditional to Verus transferring certain licences into Oyster. Once completed this will add 2C resources of 320.7BCF (c53mmboe) to IOG and create a further Southern North Sea (SNS) hub.
Under the terms of the deal IOG will pay an initial consideration of £1m, £750k nine months after completion with up to an additional £3.25m upon certain milestones being met in the development stage. The licences being acquired contain the Vulcan East, Vulcan North West and Vulcan South fields, known as the Vulcan Satellites and require no further appraisal. Oyster also has cUS$25.6m of losses which can be carried forward to reduce future taxes. The Vulcan Satellites lie 30-45km east of the Blythe field and IOG is in advanced discussions with regards to an export route for its SNS hubs, once these are arranged IOG will be able to prepare the FDPs. As part of the deal IOG will take on liability for decommissioning a suspended well on Vulcan East estimated to cost £3m.
Following its funding by London Oil & Gas IOG has pursued an acquisitive strategy and we are pleased to see IOG add further resources at a low cost of US$0.22/boe. We retain our BUY recommendation and place our TP under review whilst we update our model.