Europa Oil & Gas (AIM: EOG) has terminated a royalty agreement covering the Whisby 4 well with BritNRG, the Whisby field operator and licence holder.
Europa said that the agreement has not generated any income for the company and further investment is required to potentially return the agreement to a cash-generating arrangement.
Given the technical risks associated with any further investment, it was decided that the company’s capital is better spent on the other assets held by Europa.
The carrying value of the agreement is currently written down to nil in the company’s accounts. Upon termination of the agreement, there are no remaining associated liabilities, since these have been written off by the parties to the agreement.
This has resulted in a £185,000 net gain to the company’s balance sheet.
Europa Oil & Gas CEO Will Holland said: “The Whisby 4 well was drilled in 2003 and since then it has been producing on natural decline to the point where the original net profits interest agreement is no longer profitable for Europa.
“Given the uncertainties associated with any further investment in the Whisby 4 well, the Board decided that our capital is better spent on other projects that offer our shareholders a better value proposition.”
Europa holds a 65% non-operated interest in the Whisby W4 well, which is based in the East Midlands west of Lincoln.
The well produces around 40bpd of oil, of which 26bpd go to Europa.
The company previously warned that its plans to extend the Wressle oil field extension were hit by legal challenge that would overturn its planning approval.
Recommended for you
