Nautical Petroleum Ltd., a subsidiary of Cairn Energy, has agreed to acquire interests in and operatorship of five gas licenses in the Southern North Sea from Deltic Energy PLC.
Under the terms of the farm out agreement, Cairn will acquire a 60% interest in each of licenses P2428 (Cupertino Area) and P2567 (Cadence) and a 70% interest in each of licenses P2560, P2561, and P2562 which lie between Breagh and Tolmount gas fields.
Deltic will retain a 40% interest in licenses P2428 and P2567 and a 30% interest in licenses P2560, P2561, and P2562.
Cairn will fund 100% of an agreed work program for each of the five licenses up to the point of making a drill or drop decision on each license, which will include the shooting of new seismic data over license P2428.
Following the farm out agreement becoming unconditional, Cairn will pay Deltic an upfront consideration of $1 million by way of contribution towards historic back costs incurred by Deltic across the license areas.
If a drilling decision is made on P2428 or P2567, which contain the most advanced prospects, according to Deltic, Cairn will fund 70% of the costs of whichever well is drilled first, subject to a gross well cost cap of $25 million.
The key prospect identified by Deltic in P248 is the Plymouth prospect, a large Zechstein carbonate buildup, which is analogous to Deltic's Pensacola prospect and the Crosgan discovery. Other leads have been identified in the Leman sandstone and the Carboniferous sections.
P2567 contains prospects in the Triassic Bunter sandstone and the Carboniferous. The Carboniferous is the primary focus and Deltic has identified the large intra-Carboniferous Cadence prospect and believes the Base Permian Unconformity (BPU) subcrop play is also prospective across the area.
Exploration in the P2560, P2561, and P2562 area has been constrained historically by a lack of high-quality 3D seismic data. Deltic believes there is potential in the Zechstein, Leman, and Carboniferous sections across the acreage.
Completion of the farm out is conditional on the entering a joint operating agreement and obtaining standard regulatory consents from the Oil & Gas Authority, subject to a 3-month backstop.