Orcadian Energy (AIM:ORCA) has agreed a provisional farm-in deal with an undisclosed partner on a licence containing the Earlham discovery in the Southern North Sea (SNS).
Orcadian also announced details of a $1.4 million (£1.1m) from an affiliate of the farm-in partner which will allow the company to repay its outstanding debt to Shell.
The North Sea Transition Authority (NSTA) awarded the licence to Orcadian earlier this month as part of the latest tranche of the 33rd licensing round.
Orcadian said the SNS licence contains the Earlham discovery, with a P50 contingent resource of 114 billion cubic feet (bcf) of sales gas.
The licence also contains a potential redevelopment project at the decommissioned Orwell gas field (30 bcf of gas) and the Clover prospect, which Orcadian said has a P50 prospective resources of 153 bcf of gas.
Orcadian previously floated a plan to use the gas licence to feed a floating power station connected to offshore wind infrastructure.
© Supplied by BDOUnder the deal, the farm-in partner will acquire an interest in all or part of the licence while Orcadian will remain operator until the assessment phase for the Earlham project is complete.
After that, the partner is expected to become operator to prepare the field development plan (FDP) and deliver the project.
Once the transaction is complete, Orcadian said the partner will pay a fee, still to be agreed, and will fund all of the Earlham and Orwell development costs.
The partner will also pay for the licence work programme and other costs until first gas production, Orcadian said.
Orcadian has granted the partner exclusivity until the end of this year.
Orcadian to settle outstanding Shell debt
In relation to the $1.4 million loan, Orcadian said in the event the deal does not go through, it will pay interest on the loan at a rate of 6% and provide the farm-in partner with a security over its 18.75% interest in the Pilot field.
In the event that the farm-in deal does not complete, for whatever reason, including a notice by the Partner that it no longer wishes to complete the farm-in to the SNS licence, interest will be payable at a rate of 6% and Orcadian will provide the Partner with a security over its 18.75% interest in the Pilot field.
Orcadian said the purpose of the loan is to enable the company to repay the outstanding loan to Shell, pay certain corporate liabilities and meet general and administrative costs.
Orcadian chief executive officer Steve Brown said the company received an approach from a partner that shares its “vision” of developing Earlham.
“We have been very impressed with the maturity of our potential partner’s concept and are keen to explore this and other opportunities to work with them,” he said.
“We are delighted that the partner also intends to provide a loan facility as part of this overall deal and it is our intention to use the proceeds of that loan to settle our outstanding debt to Shell.”
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