Shell enters into partnership with Cluff for Southern North Sea licenses

Cluff's License P2252; Source: Cluff

London-based Cluff Natural Resources has entered into a binding, conditional farm out agreement and a three-month exclusive option with Shell in relation to the company’s Southern North Sea Licenses P2252 and P2437, respectively.

Cluff’s Chief Executive, Graham Swindells, said: “This partnership is a clear endorsement of the quality of the licenses in our portfolio and demonstrates the Cluff technical team’s ability to identify and transform overlooked or less understood opportunities.

“We are particularly excited at the prospect of embarking on our partnership with Shell with both parties sharing a commitment to further development in the Southern North Sea.

“Most importantly, we now have direct visibility over the route to future drilling activity, and the potential to create further significant value for shareholders.”

Farm out of license P2252

Under the terms of the farm out agreement, Shell will acquire a 70 percent working interest in License P2252, and be appointed as the license operator, in return for paying 100 percent of the costs of an agreed forward work program to the earlier of December 31, 2020, or the date on which a well investment decision is made.

Cluff will retain a 30 percent non-operated interest in License P2252.

The agreed work program for P2252 includes the shooting of not less than 400km2 of new broadband 3D seismic data over the Pensacola prospect in the summer of 2019, subsequent processing of new and existing seismic data and sub-surface studies required to support a well investment decision before the end of 2020.

All costs in relation to P2252 following the well investment decision will be satisfied by each party in proportion to their working interests.

Completion of the farm out is conditional on the entering into of a joint operating agreement and the obtaining of regulatory consent from the Oil & Gas Authority, subject to a six month backstop.

P2252 contains the Pensacola prospect which is estimated to contain unaudited mean GIIP of 566 BCF (equivalent to approximately 100 mmboe).

License P2437 option

The company has granted Shell the option to acquire a 50 percent working interest by April 30, 2019. If the option is exercised the company will retain a 50 percent working interest and operatorship until a well investment decision is made with Shell paying the costs to date. The consideration receivable by the company is a total of $600,000 which is comprised of an initial payment and a further payment upon completion.

If a decision is taken to drill an exploration well on P2437, Shell will pay a share in the proportion of 1.5:1 of the cost of an exploration well and the well test subject to an aggregate cap of $25 million. Shell would therefore pay 75% of costs up to a total of $25 million. Any cost over-runs associated with the well above this level are to be satisfied by each party in proportion to their working interest.

If the option is exercised completion will be conditional upon agreeing a joint operating agreement and receiving consent from the Oil & Gas Authority.

P2437 contains the Selene prospect which is estimated to contain unaudited mean GIIP of 509 BCF (equivalent to approximately 90 mmboe) and is located adjacent to Shell operated infrastructure associated with the Barque gas field.

Talks for P2248 license terminated

When it comes to its other licenses, Cluff said it was no longer in non-exclusive negotiations with its preferred bidder in relation to License P2248, as the bidder has been unable to demonstrate the necessary financial capacity to fund the forward work program within the necessary timeframe.

The company added it continues to pursue options for funding a well on this license with other potential partners. If the company runs out of time and a farm out is not agreed and announced by February 28, 2019, the company will relinquish the license and seek to re-license it in the UK’s 32nd Offshore Licence round.

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