Orcadian Energy is pleased to announce the signing of a non-binding Heads of Agreement with a potential farm-in partner concerning its recently awarded SNS Licence.
Summary:
- The agreement outlines a potential farm-in to Orcadian’s proposed SNS licence, providing the Partner with a period of commercial exclusivity. Orcadian announced the offer of the SNS Licence on 7 May 2024.
- The HoA details the key terms of a proposed long-term loan of $1.4 million payable to Orcadian by an affiliate of the Partner.
- The agreement also delineates further opportunities to collaborate on generating low-carbon electricity for customers.
Farm-in Deal
The SNS licence includes the Earlham discovery, with a P50 contingent resource of 114 bcf of sales gas, a potential redevelopment project for the now-decommissioned Orwell gas field, which Orcadian believes can deliver over 30 bcf of gas, and the Clover prospect, which has a P50 prospective resource of 153 bcf of gas.
- The Partner will acquire an interest in all or part of the SNS licence, with Orcadian remaining as the operator until the assessment phase for the Earlham project is complete. Afterward, the partner is expected to become the operator to prepare the field development plan and deliver the project.
- Upon completion of the transaction, the Partner will pay Orcadian an agreed fee and fund all development costs for Earlham and Orwell, the SNS Licence work programme, and other licence costs until first gas production.
- Orcadian has granted the Partner commercial exclusivity until 31 December 2024 to complete definitive documentation for the overall deal.
- This provisional agreement is subject to execution of licence documentation, completion of due diligence, negotiation of documentation, various regulatory consents, and Board approvals from both parties. There is no guarantee that the transaction will be completed.
Long-term Loan
An affiliate of the Partner has agreed in principle to loan Orcadian $1.4 million for up to two years. The loan is intended to be settled from the completion payment due under the proposed farm-in arrangement. If the farm-in deal completes, there will be no fees or interest payable.
- Should the farm-in deal not complete for any reason, including the Partner’s withdrawal, interest will be payable at a rate of 6 percent, and Orcadian will provide the Partner with security over its 18.75 percent interest in the Pilot field.
- The loan documentation is expected to be completed to allow drawdown before 13 June 2024. The loan’s purpose is to enable Orcadian to repay an outstanding loan to Shell, pay certain corporate liabilities, and meet general and administrative costs.
Steve Brown, Orcadian’s CEO, commented: “We have been approached by a partner that shares our 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. 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.”
For more information visit www.orcadian.energy
