Union Jack Oil PLC (LON:UJO) has agreed to acquire an additional 30% interest in the North Kelsey project, taking its stake in the exploration project to 50%.
It is acquiring the stake from Egdon Resources with a £100,000 payment in cash.
Additionally, the deal includes an agreement to cancel the disproportionate funding obligation attached to Union Jack’s original 20% interest in North Kelsey, stipulated in a prior farm-in deal between the two UK oil firms.
All further financial obligations at North Kelsey will be carried equally, in line with their respective 50% stakes in the project.
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David Bramhill, Union Jack Oil executive chairman, pointed out that North Kelsey is a low-cost and ‘drill ready’ project. The acquisition of the additional stake in the project is in line with the company’s growth strategy, he added.
"The increase in our interest to 50% increases our exposure to this potentially value-adding project and expands our balanced drilling and development portfolio,” Bramhill said in a statement.
"North Kelsey sits within our focus areas of the East Midlands, Humber Basin and East Yorkshire and is on trend with our Wressle oil development project which is on track to produce first oil later this quarter.
"The acquisition of this additional 30% interest has been executed on attractive terms without any promote and will also deliver additional savings by removing our previous farm-in carry obligations,” he added.
In a separate statement, Egdon managing director Mark Abbott said: "We are pleased to have reached agreement with Union Jack to fully align our interests and objectives in PEDL241 prior to a planned joint farmout of the drill ready North Kelsey-1 exploration well.”
North Kelsey is seen as an analogue of the Wressle field. It is seen to have the potential for oil in four stacked conventional Carboniferous reservoir targets. According to Egdon’s estimates it has between 4.66mln and 8.47mln barrels of prospective resources – with the mean estimate set at 6.47mln.
The plan now is to carry out a further farm-out transaction to bring in a further partner to the venture, ahead of a drill programme in 2021. Last month, existing planning consent for a well was extended to December 31 2020.