North Sea-focused oil and gas company Orcadian has entered into a non-binding Heads of Agreement with Rapid Oil Production Ltd to dispose of its interests in the Crinan and Dandy discoveries in the UK North Sea.
Orcadian, which describes the Crinan and Dandy as non core assets, explained that Rapid was progressing the development of the nearby Fyne field, with the intention of achieving FDP Approval in 2023, and could bring the Crinan into production as part of the Fyne cluster in phase two or three of the field development. This could potentially be followed by a Dandy tie-back via Fyne.
If this progresses to completion, Orcadian, which is focused on its Pilot offshore oil field, would receive a cash consideration of US$500,000, of which US$100,000 on signature of a binding Sale and Purchase Agreement, and US$400,000 on Crinan FDP Approval. Rapid would also pay a royalty on oil and gas produced from the fields.
Rapid has agreed to pay an oil price dependent royalty which ranges from 2.5% to 4.0% for production from these fields. Rapid and Orcadian have also agreed that Orcadian's deemed equity share of the Crinan discovery is 60%. Rapid Oil will additionally pay a 1% royalty to TGS ASA.
Steve Brown, Orcadian's CEO, said: "We are delighted to have reached an initial agreement with Rapid Oil, on the proposed disposal of these non-core assets. Rapid Oil are focussed on achieving a development plan approval for Fyne and Crinan and we believe they will be best placed to develop the Dandy fields through the same infrastructure. We look forward to converting these heads of terms into a binding agreement and will provide further updates as negotiations progress; and we look forward to potentially sharing in the cash flow from these discoveries if these fields are developed."
Hallvard Hasselknippe, Rapid Oil Production's CEO commented:"We are pleased to add the potential of the Crinan and Dandy resources to our field development plan for the Fyne field, this adds approximately 7 MMbbl to our contingent resources. In particular Crinan will be a very cost efficient add-on as it can be drilled from the Fyne Central location."
The heads of terms are subject to, amongst other items, due diligence, North Sea Transition Authority ("NSTA") consent and the finalisation of binding legal documents. Accordingly, there can be no guarantee that a final agreement will be entered into or that this disposal will complete.
Crinan and Dandy were discovered by Mobil in 1987 and 1990 respectively, and appraised by Monument in 1998. Crinan straddles the boundary between 21/28a, Orcadian's block, and 21/28b, Rapid Oil's block, whilst Dandy lies entirely within 21/28a.
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