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Angus Energy enters partnership at Balcombe Field
Conventional oil and gas production and development company Angus Energy announced on Monday that it has entered into a definitive agreement to form a new partnership with Cuadrilla Balcombe and Lucas Bolney.
The AIM-traded firm said that, subject to satisfaction of the terms of the agreement, it would join the partnership through the acquisition of a 25% interest in licence PEDL244, which includes the entire Balcombe Field discovery.
On behalf of the partnership, Angus Energy would - subject to Oil and Gas Authority approval - assume operatorship of the Balcombe licence.
The company said it would commence a fully-approved well test programme of the Balcombe-2Z horizontal well at the earliest opportunity, and would also establish a local community liaison group and contact local residents "at the appropriate time" before work commenced.
Under the terms of the agreement, Angus would pay a cash amount in two parts, along with the costs of the well test programme of Balcombe-2Z.
If the results of the well test were determined successful, the company would assume the associated costs of a field development plan submission to the Oil & Gas Authority.
The acquisition had been unanimously approved by the board, Angus said, and would require additional sources of capital.
As a result, the board was reviewing several financing options and was said to be in the final stages of selection, with an update to be provided "in due course".
All operations at Balcombe would be performed through conventional production, with Angus confirming there would be no hydraulic fracturing or 'fracking'.
Under the terms of the acquisition, Angus Energy Weald Basin No.3 Limited - a wholly-owned subsidiary of Angus Energy - had conditionally agreed to acquire the 25% interest in PEDL244 on a pro-rata basis from Cuadrilla and Lucas.
Terms of the deal included an agreement to pay within 20 working days of 20 January £2m, less £0.15m already paid under a confidentiality agreement with the sellers.
Angus would also pay £2m following consent from the OGA for the acquisition, and carry out and pay for the well test of a horizontal well test programme of the Balcombe-2Z to achieve certain objectives.
Those objectives included the measurement of the well-flowing production rates for oil and natural gas, measuring the flowing bottom hole and wellhead well pressures, determine the gas oil ratio of production from the well, collect and analyse well oil, gas and water samples, and measure and record well shut-in bottom hole pressure over approximately one month.
Should the OGA not approve the acquisition, the initial £2m payment would be refundable.
The company also noted a fully-approved test programme of the Balcombe-2Z well would require "minimal preparation" as the well was drilled and ready for testing.
PEDL244 had been operated on a 'care-and-maintenance' basis since 2013, with no production and limited costs.
There were no assets other than the licence interest associated with the acquisition, Angus confirmed, and the only liability was a restoration liability estimated at a gross amount of around £0.2m.
"This transaction complements our existing asset base and aligns with our goal of enhancing shareholder value," said Angus managing director Paul Vonk.
"This joint venture is an important milestone as we execute our business plan."
Vonk said both the new partnership and Cuadrilla's and Lucas' recognition of Angus Energy's ability to manage and execute operations in a safe and efficient manner at Balcombe were "gratifying" to the entire team.
"We are also looking forward to the near term testing of Balcombe-2Z horizontal well as it will further add to our knowledge base and understanding of the Kimmeridge layers."
Francis Egan, CEO of Cuadrilla, added that following the approval of their planning application to flow test and monitor the existing horizontal exploration well at Lower Stumble, the company was "delighted" to form this new partnership with Angus Energy, an "existing and successful" operator in the area.
"This agreement will enable the testing works to be undertaken in a timely way and to the highest standards, whilst we continue to also focus on our shale gas operations in the North West."