Baron Oil (LON:BOIL) was one of AIM’s top risers on Wednesday after the oil explorer revealed a work-sharing agreement alongside the release of their final results.

Baron Oil announced a work-sharing agreement “with a large European Exploration and Production Company” for in the Inner Moray Firth area. The news is a milestone in the prospect which could lead to significant value creation for Baron Oil’s shareholders.

Baron Oil has a 15% interest in the prospect and the work sharing agreement could lead to a more formal farm-in agreement.

The explorer, who has prospects in South East Asia, Latin America and the UK, also posted a significant reduction in pre-tax losses to £1.7m in their final results.

Commenting on the results, Malcolm Butler, Executive Chairman, said:

“The final award of the Chuditch PSC was a great result for your Company and marks a step-change in Baron’s asset base. However, our industry is currently faced with the dual global impact of significantly lower oil prices and the rapid spread of the COVID-19 virus. While Baron is not insulated from the oil price shock, it should be noted that the Company’s assets are all in the pre-cashflow exploration phase and, following the award of the Chuditch PSC, are now heavily weighted towards gas where regional markets play a much greater role in pricing.”

“In Timor-Leste, there is no obligation to drill before 2022 and any commercial production is unlikely to be achieved before 2025. There are no plans to fund drilling in the UK for the foreseeable future. In both cases, work on these projects over the next 12 months is desk and computer-based and should not be affected by current movement restrictions, although gaining access to the necessary data is being delayed.”

“As regards the El Barco-3X well in Peru, it is unclear how much local oil companies’ appetite for drilling will be affected by oil price movements and although it is unlikely that local gas prices in this part of Peru will be affected by the drop in oil prices, it is impossible to predict the effects on short term gas demand of a COVID-19 related recession.

“Critically for shareholders, following our £2.5m (gross) fund raise in Q1 2020, our proposed work programme for 2020 and into 2021 is funded.”

Analysts were also positive on the results and pointed towards potential uplift for Baron Oil.

“Exclusivity may be extended until 31 December 2020 in the event that the interested party wishes to negotiate a formal farm-in agreement. In the event that the third parties’ technical work suggests significant potential resources to be present on the licence and a farm-in is agreed, we believe that the value of Baron’s interest could increase significantly,” Barry Gibb, Research Analyst at Turner Pope, wrote in a note.