Ping Petroleum has completed its farm-out deal relating to the Pilot field in the North Sea with Orcadian Energy (AIM:ORCA).
Ping will now own a controlling 81.25% interest in licence P2244, which contains the Pilot field, while Orcadian retains the remaining 18.75% stake.
Orcadian has no requirement to fund the pre-production development project work programme and will retain its stake in the Pilot licence to the first offload of oil produced from the field.
Orcadian chief executive, Steve Brown, said: “I am very excited by the prospects for the development and as the major shareholder has facilitated the farm-out by providing a personal guarantee further demonstrating my commitment to Orcadian.
“Heavy, viscous oils make up a high proportion of the UK’s undeveloped discovered resources and we believe that in a post-transition world, we will still need hydrocarbons, specifically heavy oils and gas.”
Last year when the deal was announced Orcadian valued of the sale of Ping’s stake at $3.1 million, though that also included the payment of historic costs incurred by the company to date.
Ping will then pay the $3m balance following the regulator’s approval of a field development plan (FDP) for the field and will also have to foot the bill for all pre-first oil scope of work.
Mr Brown added: “Ping has been at the forefront of planning field developments that take advantage of renewable power, and we are confident that Ping can put together a very low emissions development scheme for Pilot.”
Orcadian, which made its IPO in London in 2021, had previously devised a novel method for developing Pilot using a polymer flooding technique to boost recoverable barrels and powered by a floating wind turbine.
Under the plan, 34 wells would be drilled via a jack-up rig through a pair of well head platforms, though the company has long acknowledged the need for a partner to take the project over the line.
Orcadian will now receive a $100,000 cash payment and reimbursement of certain past costs capped at £250,000.
The firm will also receive a $3 million payment upon the approval of a field development plan (FDP).
Mr Brown concluded: “We are delighted to be working with the Ping team to bring this project to fruition.
“They are commercially and technically innovative and have built a team here in the UK which is not just a replication of a big company structure, but one which is capable of delivering a really innovative and cost-focussed project for us all.”
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