TIDMORCA
RNS Number : 0523W
Orcadian Energy PLC
07 December 2023
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER
THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF
UK DOMESTIC LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT
2018, AS AMED. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
7 December 2023
Orcadian Energy plc
("Orcadian Energy", "Orcadian" or the "Company")
Pilot Farm-out Deal and Partnership with Ping Petroleum
Further to the announcements of 18 September 2023 and 1 December
2023, the Company is pleased to confirm it has executed a
conditional Sale and Purchase Agreement ("SPA") with Ping Petroleum
UK plc ("Ping") for the farm-out of an 81.25% interest in the
Company's flagship asset, the Pilot Development project (Licence
P2244) (the "Transaction").
The total consideration due under the SPA is US$3,100,000 (plus
the payment of certain historic costs incurred by Orcadian to
date).
The initial consideration of US$100,000 is payable on completion
(being the date that P2244 is transferred to Ping, which will occur
when the conditions set out below are satisfied ("Completion"). It
is anticipated Completion will occur before the end of March 2024.
On Completion, Ping will become operator of the Licence. Ping will
pay the balance of the consideration (US$3,000,000) on approval by
the North Sea Transition Authority ("NSTA") of a Field Development
Plan ("FDP") for the Pilot Field. The FDP is currently anticipated
to be submitted during 2024. Further updates will be provided as
this progresses.
The SPA is conditional on, amongst other matters, Orcadian
shareholder approval.
Highlights
-- Orcadian has executed a conditional Sale and Purchase
Agreement with Ping, which details the farm-out of the Pilot
development project.
-- Orcadian has now requested NSTA approval for the assignment
of an 81.25% interest in the P2244 licence to Ping, and the
appointment of Ping as operator of the P2244 licence, as required
by the NSTA.
-- The Pilot field is one of the largest undeveloped discoveries
in the Central North Sea, with significant upside potential in the
surrounding area.
-- Subject to satisfaction of the outstanding conditions, Ping
will acquire an 81.25% interest in Licence P2244 and will become
operator of the Pilot licence and development project.
-- Based upon the Competent Person's Report ("CPR") prepared by
Sproule in 2021, Ping will acquire net reserves or resources of
63.4 MMbbl on completion of the deal, with Orcadian retaining 14.6
MMbbl of 2P reserves, carried to first oil.
-- Following completion, Ping and Orcadian will work to deliver
a FDP to the NSTA for a polymer flood development of the Pilot
field, with industry leading emissions performance.
-- Orcadian management believe this updated development plan
could increase ultimate Pilot field recovery by 5-10% relative to
the 2021 CPR scenario audited by Sproule.
-- Under the terms of a proposed Joint Operating Agreement
("JOA"), which is a condition of the SPA, Orcadian will retain an
18.75% carried interest in the Pilot development with Ping paying
100% of the pre-first oil scope of work.
-- As announced on 25 October 2023, Orcadian and Ping previously
requested that NSTA extend the second term of licence P2244 and
were granted a two-year extension to the second term of the
licence. This extension remains conditional upon completion of the
farm-out prior to the end of March 2024.
-- Orcadian and Ping are also negotiating a Joint Bidding
Agreement ("JBA") in respect of, and requested an out-of-round
application for, the area of former Licence P2320 (which Orcadian
had to relinquish earlier this year), in support of the Pilot
development and the area plan.
Steve Brown, Orcadian's CEO, commented:
"We are delighted to have executed this agreement with Ping and
look forward to completing the documentation and receiving all the
necessary approvals so that the deal can complete before end 1Q
2024.
We believe this deal will be transformational for Orcadian. Not
only does it set out a clear pathway to production for the Pilot
field, but also provides a number of opportunities, which we are
excited about, in the wider Western Platform area which this
partnership will enable us to grasp.
The Board consider Ping to be an innovative operator that
understands how to deliver development projects that concord with
the NSTA's net zero goals. Ping is the owner of the Excalibur FPSO
and has engaged with the owners of a number of floating production
storage and offloading (FPSO) redeployment candidates and we
believe they can identify the right solution for Pilot very
quickly. We have been impressed with Ping's commercial agility and
technical ability, and we look forward to working with the Ping
team to deliver a successful Pilot development.
The UK needs clean, new, producing fields to meet its twin goals
of Energy Security and Net Zero. We believe that Pilot is an
essential part of that future portfolio of North Sea production and
that the benefits to the balance of payments, the economy and for
workers in the industry are clear."
Background
The Pilot field is the Company's core asset and securing a
partner to farm-in to the project and finance the development of
the Pilot discovery has been the Company's key focus since its
foundation. Pilot was discovered by Fina Petroleum in 1989 and is
well appraised. The development plan under discussion with Ping is
designed to phase the project to maximise opportunities for
learning and to minimise the initial cost of the development.
The Pilot field has 2P Reserves of 78.8 MMbbl, as audited by
Sproule in April 2021, a copy of the Sproule report is contained in
the Company's Admission document, which can be found on the
Company's website. The proposed revised plan could, based on
Orcadian management's internal estimates, result in an uplift to
this resource estimate; but the overall outcome will be dependent
on the precise plan adopted by the partnership. The Company intends
to update the Competent Person's Report for Pilot once the FDP has
been finalised.
Conditions Precedent
The SPA includes a number of conditions precedent including, but
not limited to, Orcadian shareholder approval; completion of
commercial and legal due diligence by Ping; execution of the JOA
referred to above; approval of the transaction (and variations to
the existing agreements in place, where appropriate) from the NSTA,
Shell, TGS ASA, and Ping's parent company board and, if required,
shareholders. Completion of the Licence assignment is subject to
the satisfaction, or waiver, of the conditions precedent and is
required to occur before the end of March 2024. Whilst there can be
no guarantee that these conditions will be satisfied, the Directors
have every expectation that they will be. Further updates will be
provided as the conditions are satisfied.
As set out above, the parties have agreed the key terms of a JOA
for the Pilot licence.
SPA: Key Terms and Consideration Payable
The key terms documented in the SPA are as follows:
-- The SPA requires that the JOA will include an agreement that
Ping will pay all of Orcadian's share of costs incurred in relation
to the pre-first oil development scope of work on the Pilot field,
and any other costs relating to the Pilot development incurred
prior to first oil.
-- On completion, Ping will be assigned an 81.25% interest in
the Pilot licence and on transfer of the licence interest Orcadian
will receive a payment of US$100,000. In addition, on FDP approval
Ping will pay Orcadian US$3,000,000.
-- Ping has agreed to cooperate with the Company to settle the
historic and future liabilities to TGS, to a maximum value of
US$1,072,000.
-- On transfer of the licence interest, Ping will pay to the
Company a pre-first oil adjustment payment, being an amount equal
to the costs incurred by Orcadian between 1 July 2023 and
Completion in relation to the Pilot Licence (P2244). This is capped
at GBP250,000.
-- The agreement contains usual commercial warranties and
indemnities for an agreement of this type.
-- On completion, Ping will become the operator of the Pilot development project.
Orcadian will continue to provide sub-surface support to the
Ping team, to build upon the work undertaken by Orcadian to prepare
a development plan for Pilot.
The two companies also intend to execute a JBA in respect of the
area of former licence P2320. Orcadian and Ping have requested that
NSTA permit an out-of-round licence application for that area. This
acreage contains extensions of the Pilot field, the likely location
of a wellhead platform to be installed later in field life, and the
Feugh oil and gas discovery. Subject to execution of the JBA,
Orcadian will receive a further US$100,000 on award of a licence
over the area of former licence P2320.
Additional Disclosures
As set out in the Company's audited accounts dated 30 June 2022
("Audited Accounts") the asset which is the subject of this
transaction (the Pilot field (P2244) is an exploration asset and
accordingly generates no turnover, profits or losses. In the
Audited Accounts the book value of P2244 is GBP2.75 million.
The Directors intend to utilise the proceeds from this
transaction for working capital purposes and to further develop the
other assets in the Company's portfolio.
AIM Rule 15 and Notice of General Meeting
Pursuant to AIM Rule 15, the Transaction is treated under the
AIM Rules as a fundamental change of business. Accordingly, the
Transaction is conditional, amongst other items, on the consent of
Orcadian's shareholders being given in a general meeting. The
Company intends to prepare and dispatch a circular detailing the
Transaction and convene a general meeting to seek approval for the
Transaction, as soon as possible. A further announcement will be
made when the general meeting is convened and the associated
circular is dispatched.
Financial Condition
The Company's current cash balance is GBP115,000, which based on
current internal forecasts is expected to provide sufficient
working capital for the Company until the first quarter of 2024.
However, the Company confirms it is in advanced discussions with
regards to a potential equity fundraising, and expects to provide
an update to the market shortly. The Board continues to manage cash
on a prudent basis as it seeks to add significant value for
shareholders.
Qualified Person's Statement
Pursuant to the requirements of the AIM Rules and in particular,
the AIM Note for Mining and Oil and Gas Companies, Maurice Bamford
has reviewed and approved the technical information and resource
reporting contained in this announcement. Maurice has more than 33
years' experience in the oil & gas industry and 3 years in
academia. He holds a BSc in Geology from Queens University Belfast
and a PhD in Geology from the National University of Ireland.
Maurice is a Fellow of the Geological Society, London, and a member
of the Geoscience Energy Society of Great Britain. He is
Exploration and Geoscience Manager at Orcadian Energy.
For further information on the Company please visit the
Company's website: https://orcadian.energy
Contact:
Orcadian Energy plc + 44 20 7920 3150
Steve Brown, CEO
Alan Hume, CFO
WH Ireland (Nomad and Broker) +44 20 7220 1666
Katy Mitchell / Andrew de Andrade (Nomad)
Harry Ansell / Fraser Marshall (Corporate
Broking)
Tavistock (PR) + 44 20 7920 3150
Nick Elwes / Simon Hudson orcadian@tavistock.co.uk
About Orcadian Energy
Orcadian is a North Sea focused, low emissions, oil and gas
development company . In planning its Pilot development, Orcadian
has selected wind power to transform oil production into a cleaner
and greener process. The Pilot project is moving towards approval
and will be amongst the lowest carbon emitting oil production
facilities in the world, despite being a viscous crude. Orcadian
may be a small operator, but it is also nimble, and the Directors
believe it has grasped opportunities that have eluded some of the
much bigger companies. As we strike a balance between Net Zero and
a sustainable energy supply, Orcadian intends to play its part to
minimise the cost of Net Zero and to deliver reliable energy to the
UK.
Orcadian Energy (CNS) Ltd, Orcadian's operating subsidiary, was
founded in 2014 and is the sole licensee of P2244, which contains
78.0 MMbbl of 2P Reserves in the Pilot discovery, and of P2482,
which contain a further 52.2 MMbbl of 2C Contingent Resources in
the Elke and Narwhal discoveries (as audited by Sproule, with both
numbers modified to take into account the TGS royalty, see the CPR
in the Company's Admission Document for more details). Within these
licences there are also 118 MMbbl of unrisked Prospective Resources
(modified for TGS royalty). These licences are in blocks 21/27a,
28/2a and 28/3a, and lie 150 kms due East of Aberdeen.
Pilot, which is the field with the largest reserves in
Orcadian's portfolio, was discovered by PetroFina in 1989 and has
been well appraised. In total five wells and two sidetracks were
drilled on Pilot, including a relatively short horizontal well
which produced over 1,800 bbls/day on test. Orcadian's proposed low
emissions, field development plan for Pilot is based upon a
Floating Production Storage and Offloading vessel (FPSO), with over
thirty wells to be drilled by a Jack-up rig and provision of power
from a floating wind turbine.
Emissions per barrel produced are expected to be about a tenth
of the 2021 North Sea average, and less than half of the lowest
emitting oil facility currently operating on the UKCS. On a global
basis this places the Pilot field emissions at the low end of the
lowest 5% of global oil production.
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END
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