Egdon Resources exercises option to farm-in at PL081

Egdon Resources plc (LON:EDR), the UK Energy Company, has advised that it has exercised the option to farm-in to onshore Production Licence PL081 under the terms of the Farmout Option Agreement with York Energy (UK) Holdings Limited as previously announced on 6 February 2023.  In addition, Egdon and York have signed a Letter Agreement with Cuadrilla North Cleveland Limited he 100% licensee of PEDL347, which would result in a farm-in and equalisation of interests between the two licences (The “FEQ Agreement”). 

The PL081 and PEDL347 licences contain the Weaverthorpe Prospect which is a shallow (c. 1000 metres) Sherwood Sandstone (Triassic) conventional prospect located immediately up-dip of interpreted gas pay in the Fordon-2 well (drilled by BP in 1974). During the six-month option period with York, Egdon has completed the reprocessing and interpretation of 214 kilometres of 2D seismic data and further technical and operational studies which have de-risked the opportunity and confirmed a material, commercially viable prospect.

Under the terms of the FEQ Agreement Egdon, York and Cuadrilla shall procure that legal and beneficial interests in both PL081 and PEDL347 are assigned between them so that both licences are held Egdon 52.5%, Cuadrilla 25% and York 22.5%.  Egdon would be appointed as the operator of the Licences. Following recovery of Egdon’s costs of the farm-in it will assign a further 2.5% interest in both the Licences to York.

The Parties have agreed to use their best endeavours to conclude the FEQ Agreement within six weeks, and to negotiate and agree a Joint Operating Agreement covering the Licences within a further six weeks. 

As consideration Egdon will pay 100% of the costs associated with the planning, drilling, logging, and either short term testing and completion or plugging and abandonment of a well to optimally test the Weaverthorpe Prospect within the Licences (the “Work Programme”).  Egdon will have a period of three years to complete the Work Programme.

Under the terms of the original Farmout Option Agreement Egdon undertook and paid for the work during the Option Period, is liable to pay 100% of any 2023 licence fees for PL081 and will pay York a cash sum of £100,000, less any licence fees that are due or have been paid for 2023.

Egdon will pay the regulatory and reasonable legal costs associated with the transfer of the Licence interests and operatorship.

The assignment of the Licence interests to Egdon, York and Cuadrilla and the transfer of operatorship to Egdon will be subject to the usual NSTA approvals.

Commenting on the Agreement Mark Abbott, Managing Director of Egdon Resources, said:

“Our technical, commercial and operational due diligence has confirmed our previous view that Weaverthorpe is a robust and commercially attractive conventional gas prospect, spanning the PL081 and PEDL347 Licences. 

This has triggered the exercise of the Option on PL081 and an agreement with Cuadrilla in respect of PEDL347, which when concluded, will cover the entire prospect area and allow the optimal appraisal and development of Weaverthorpe on behalf of the new Joint Venture.

Indigenous gas resource like Weaverthorpe provide local employment and generate taxes whilst having compelling environmental and security of supply benefits by reducing the UK’s increasing reliance on imports of LNG which carry significantly higher pre-combustion emissions.  Producing gas from Weaverthorpe would be fully aligned with the Government’s Energy Security Strategy and Net Zero targets.

We look forward to working with York, Cuadrilla and our wider stakeholders on delivering the planned work programme over the coming period.”

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