Orcadian Energy shares surged in the first hour of trading on Monday after announcing a potential farm-out of the Pilot development project.
Orcadian Energy has reached a major milestone that could enable the development of the massive Pilot oil field in the North Sea, according to an announcement Monday.
Orcadian Energy shares were over 70% higher at the time of writing.
The Edinburgh-based company revealed it has signed a provisional agreement with a major operator to acquire an 81.25% stake in the Pilot project, located in the Central North Sea about 150 miles east of Aberdeen.
If finalised, the farm-out deal would bring the expertise and financial backing of an established player to bear on extracting oil from the large but challenging Pilot discovery. Orcadian retains a carried 18.75% interest in the development.
The companies aim to submit a field development plan to UK regulators featuring a polymer flood, an enhanced recovery technique viewed as more environmentally friendly than alternatives. Success could allow upward revision of Pilot’s reserve estimates.
Completing the transaction requires due diligence, further negotiations, and various approvals. Still, the agreement represents meaningful progress for Orcadian after financial constraints forced it to relinquish the adjoining license earlier this year.
“We are delighted to have reached this agreement, which sets out a potential pathway to production for the Company’s Pilot field,” said Steve Brown, Orcadian’s CEO.
“The Pilot field has a substantial proven reserve base with material upside potential in the surrounding area. We are delighted this transaction could enable Orcadian to retain a significant interest in the project and to enjoy the long-term benefits of producing oil for the UK.
“Developing energy in our own backyard contributes to the UK’s Energy Security and balance of payments; delivers long-term high-quality jobs; and minimises emissions associated with satisfying the UK’s need for energy.
“We look forward to progressing the next stages of this proposed transaction and providing further updates.”