LONDON: In a significant move towards the development of its Southern North Sea (SNS) Licence, Orcadian Energy (AIM: ORCA) has announced a non-binding Heads of Agreement with a prospective farm-in partner. This preliminary agreement, revealed on May 7, 2024, grants the partner a period of commercial exclusivity and outlines the terms for a potential collaboration on Orcadian’s SNS Licence.

Key Highlights of the Agreement:

• Farm-in Proposal: The partner is set to acquire an interest in Orcadian’s SNS Licence, which includes the Earlham discovery with a P50 contingent resource of 114 billion cubic feet (bcf) of sales gas, the decommissioned Orwell gas field with over 30 bcf of gas potential, and the Clover prospect with a P50 prospective resource of 153 bcf of gas.
• Operational Leadership: Orcadian will continue to operate the licence until the Earlham project’s assessment phase is complete. Subsequently, the partner is expected to take over as operator to prepare the Field Development Plan and manage the project’s delivery.
• Financial Commitment: Upon finalizing the transaction, the partner will compensate Orcadian with an agreed fee and cover all development costs for the Earlham and Orwell projects, the SNS Licence work programme, and other associated licence costs until the commencement of gas production.
• Exclusivity Period: Orcadian has granted the partner exclusivity until December 31, 2024, to finalize the comprehensive deal documentation.

Loan Arrangement:

An affiliate of the partner has provisionally agreed to provide Orcadian with a long-term loan of $1.4 million, intended to be repaid from the farm-in completion payment. The loan, which is to be documented by June 13, 2024, aims to assist Orcadian in settling its debt to Shell and covering various corporate expenses.

CEO’s Vision:

Steve Brown, CEO of Orcadian Energy, expressed enthusiasm about the partnership, stating, “We have been approached by a partner that shares our vision of developing Earlham. We are impressed with our potential partner’s mature concept and are eager to explore further opportunities for collaboration.”

The agreement and loan are subject to various conditions, including due diligence, regulatory consents, and board approvals from both Orcadian and the partner. While this marks a provisional step forward, there is no certainty that the transaction will reach completion.

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