Orcadian Energy (AIM: ORCA) has been forced to give up a 25 million-barrel North Sea discovery after the NSTA regulator stepped in.
It means planned farm-outs of two “sub-areas” to Rapid Oil Production, announced in January, and to Carrick Resources, announced in August, will not now proceed.
Following “extensive discussions” with the North Sea Transition Authority, Orcadian confirmed it has not been granted another extension to the P2320 licence.
The NSTA, which granted a Phase A extension in March last year, said it could not comment on specific cases.
Stewardship expectations from the NSTA mean it may choose not to extend a licence if certain obligations are not met.
According to its website, the NSTA can extend a licence beyond expiry “if necessary to allow producing fields to fully exploit the associated reserves” and will not be extended “until it is clearly necessary”.
It adds: “The NSTA may request an update to the field development plan to support a request for a licence extension and, where warranted, we may refuse to extend a licence.”
Orcadian shares are down 16%, to 5.2p, as of 10am.
P2320 contained the Blakeney discovery, with 2C resources of 25 million barrels, along with the Feugh, Dandy and Crinan discoveries.
Prospects Bowhead and Carra also sit within the licence.
AIM-listed Orcadian, which needs to raise funds to repay a £1m loan facility with Shell, has been hunting for a partner on its flagship Pilot discovery, and seeking to offload sub-areas of P2320.
In January it struck a heads of agreement deal with Rapid Oil Production for the “non-core” Dandy and Crinan discoveries, which would have been it receive a $500,000 payout plus royalties, if it proceeded.
Meanwhile, the 50% Carra farm-out to Carrick, announced last year, did not have cash considerations but saw Carrick take on work milestones.
Orcadian says it intends to make an out-of-round application for part of P2320, which covers a section of its Pilot field as an extension.
CEO Steve Brown said: “Whilst we obviously would have preferred that NSTA had extended Phase A of P2320, we are pleased to have progressed discussions on the prospects we had identified in the area with multiple potential partners, who have been willing to agree non-compete arrangements with us.
“We are determined to catalyse the drilling of the prospects we have identified and to deliver on our Central Obligation to Maximise Economic Recovery from the UKCS whilst continuing to minimise the potential emissions from any future development.”
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