Egdon Resources (LON:EDR) have seen their shares spike on Tuesday after the firm noted it had partnered with an oil major.
Shares in Egdon trade at 5p having spiked 2% on Tuesday. 21/1/20 14:21BST.
Egdon told the market that they had partnered with Shell (LON:RDSB) on two UK gas discoveries.
Egdon signed the exclusivity agreement in November with a “large internationally-recognised exploration and production company” covering the P1929 and P2304 offshore UK licences.
Shell will be taking a 70% working interest in the two licenses and will take over operations, whilst Egdon will keep the remaining 30%.
Shell will pay for the stake by funding 85% of the costs of buying and processing 3D seismic survey data for the Resolution and
Endeavour gas discoveries on the licences. The acquisition price is capped at $5 million, beyond which Shell will pay 70% of costs.
Mark Abbott, Managing Director of Egdon Resources plc, said:
“We are delighted to have signed a farm-in agreement with Shell in respect of these highly prospective licences. This transaction validates our views on the potential of these blocks and introduces a highly experienced and respected operator to progress appraisal activity on the Resolution and Endeavour gas discoveries. In difficult market conditions Egdon has secured a substantial carry on costs to the well investment decision whilst retaining a material 30% interest in the licences.
Our immediate focus will be to work with Shell to agree a forward work programme and timeline for the licences with the OGA. The first part of this work programme will be the acquisition of a marine 3D seismic survey to enable a decision on the contingent appraisal well. We look forward to working with Shell and benefitting from their substantial worldwide operational experience and expertise, including in the development of carbonate reservoirs of this type.”
Mixed few months for Egdon
Prior to today’s announcement, Egdon have seen a mixed few months.
In November, the firm saw its shares spike as it told the market it had received a six month extension for two UK offshore gas licenses.
The UK Oil & Gas Authority extended the period for the P1929 and P2304 licenses until the end of May 2020.
With the new extension, the firm will be able to execute a farm-in deal for the licenses to provide funding for the projects by the end of January.
P1929 has estimated contingent gas resources of 231 billion cubic feet of gas and P2304 another 18 billion cubic feet.
Shell expand and create new partnerships
Shell are continuing to expand their horizons through deals and parternships. Last week, a notable update hit the market which involved Shell.
The firm said last Thursday that they signed a memorandum of understanding with China National Offshore Oil Corp (HKG:0883) to build its first commercial scale polycarbonate production plant.
The deal that has been reached aims to build more production equipment at the new site in Huizhou and shows an active effort by the multinational to invest into China.
Shell have already made headways in Singapore for another plant in similar fashion to the one mentioned today, and this is being built at its Jurong Island Chemicals Plant as an interim step.
Egdon Resources would have impressed with the market and shareholders with the partnership with an oil titan in Shell.
The firm will be hoping that this partnership can prove fruitful and produce results for both parties.