REG - Orcadian Energy PLC - Completion of Pilot Farm-out

Orcadian EnergyAnnouncement

02/04/2024 07:00

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RNS Number : 8921I  Orcadian Energy PLC  02 April 2024

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO
CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION
(EU) NO. 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW PURSUANT TO THE EUROPEAN
UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE PUBLICATION OF THIS
ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS
CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

2 April 2024

Orcadian Energy plc

("Orcadian Energy", "Orcadian" or the "Company")

Completion of Pilot Farm-out

Orcadian Energy (AIM: ORCA) is delighted to announce the completion of the
previously announced farm-out of an 81.25% interest in licence P2244, which
contains the Pilot field, to Ping Petroleum UK plc ("Ping"). Ping is focused
on shallow water offshore production and development opportunities and has a
significant acreage holding to the East of Pilot.

This means that Orcadian Energy retains an 18.75% interest in the Pilot field
development, fully carried to the first offload of oil produced from the
field. Orcadian has no requirement to fund the pre-production development
project work programme.

The Pilot project is intended to benefit from the application of polymer
flooding technology which is enjoying consistent success on Ithaca's Captain
EOR project. For medium viscosity oils like Pilot, polymer flooding
significantly reduces fluid handling, and hence energy requirements and
materially boosts the recovery factor. Sproule audited the reserves on the
Pilot field in 2021 and attributed gross 2P reserves of 78.8 MMbbl to a
polymer flood scheme. To be consistent with Ping's reserve classification
scheme these volumes will be reclassified as 2C Contingent Resources
(Development Pending) until the FDP is approved. Please see the updated
resource estimates for the company at the end of this press release which
include management and operator estimates of the resources associated with
licences offered but not yet awarded.

The near-term focus of the Ping team will be to select a suitable FPSO and
prepare a FDP for submission to the North Sea Transition Authority ("NSTA").
Orcadian will support the Ping team especially on the sub-surface aspects of a
draft FDP which has already been reviewed by NSTA.

The commercial terms of the transaction are summarised below:

·    Ping has acquired an 81.25% interest in licence P2244, which contains
the Pilot field;

·    Ping has been appointed operator of the licence;

·    Orcadian will retain an 18.75% fully carried interest in the Licence;

·    The carry will apply to all pre-first offload expenditure up to a cap
which will be based upon the field development plan budget, as submitted to
NSTA, inclusive of contingencies and will be repaid by a combination of a
reduced revenue interest of 10% and any cash tax benefits enjoyed by Ping
related to the carry expenditure;

·    On repayment of the carry the revenue interest will revert to 18.75%

·    Orcadian will now receive a $100,000 cash payment and reimbursement
of certain past costs capped at £250,000;

·    Orcadian will also receive a $3m payment on FDP approval.

The net result of the carry arrangements is that Orcadian will enjoy a net
present value (NPV) which is marginally greater than its equity share in the
NPV of the overall project, but without having to raise capital to fund the
project capex.

Facility Agreement

Under the terms of the facility agreement, Shell International Trading and
Shipping Company Limited ("STASCO") has given its consent for the farm-out of
81.25% of the P2244 license to Ping.

To secure the consent Stephen Brown has given a personal guarantee to STASCO
for the loan amount. STASCO also requires that Stephen Brown procures a share
charge over the ordinary shares held by him and his wife in Orcadian and until
such time as this can be arranged Stephen Brown has undertaken that he will
not dispose of nor create security over the shares.

Steve Brown, Orcadian's CEO, said:

"The Pilot development is a fantastic opportunity for our new partners, Ping,
the UK oil and gas industry more widely, and of course for Orcadian. I am very
excited by the prospects for the development and as the major shareholder have
facilitated the farm-out by providing a personal guarantee further
demonstrating my commitment to Orcadian.

"Heavy, viscous oils make up a high proportion of the UK's undeveloped
discovered resources and we believe that in a post-transition world we will
still need hydrocarbons, specifically heavy oils and gas. Heavy oils can
supply the lubricants, asphalt, and anode grade petroleum coke markets which
will continue to grow even as gasoline and diesel demand falls.

"Application of well proven polymer flooding technology early in a viscous oil
development can significantly reduce emissions associated with the production
process. Ping has been at the forefront of planning field developments that
take advantage of renewable power, and we are confident that Ping can put
together a very low emissions development scheme for Pilot.

"We are delighted to be working with the Ping team to bring this project to
fruition. They are commercially and technically innovative and have built a
team here in the UK which is not just a replication of a big company
structure, but one which is capable of delivering a really innovative and
cost-focussed project for us all."

 

For further information on the Company please visit the Company's website:
https://orcadian.energy (https://orcadian.energy)

 

Contact:

 Orcadian Energy plc                                   + 44 20 7920 3150
 Steve Brown, CEO

 Alan Hume, CFO
 Zeus (Nomad and Joint Broker)                         +44 20 3829 5000
 Dan Bate / Alex Campbell-Harris (Investment Banking)

 Simon Johnson (Corporate Broking)
 Novum (Joint Broker)                                  +44 207 399 9425
 Colin Rowbury / Jon Belliss
 Tavistock (PR)                                        + 44 20 7920 3150
 Nick Elwes / Simon Hudson                             orcadian@tavistock.co.uk (mailto:orcadian@tavistock.co.uk)

 

Qualified Person's Statement

Pursuant to the requirements of the AIM Rules and in particular, the AIM Note
for Mining and Oil and Gas Companies, Maurice Bamford has reviewed and
approved the technical information and resource reporting contained in this
announcement.

Maurice has more than 33 years' experience in the oil & gas industry and 3
years in academia. He holds a BSc in Geology from Queens University Belfast
and a PhD in Geology from the National University of Ireland. Maurice is a
Fellow of the Geological Society, London, and a member of the Geoscience
Energy Society of Great Britain. He is Exploration and Geoscience Manager at
Orcadian Energy.

 

About Orcadian Energy

Orcadian is a North Sea focused, low emissions, oil and gas exploration and
development company. Orcadian may be a small operator, but it is also nimble,
and the Directors believe it has grasped opportunities that have eluded some
of the much bigger companies. As we strike a balance between Net Zero and a
sustainable energy supply, Orcadian intends to play its part to minimise the
cost of Net Zero and to deliver reliable energy to the UK.

Orcadian's key asset is the Pilot oilfield, Pilot was discovered by PetroFina
in 1989 and has been well appraised. The field has excellent quality reservoir
and contains 263MMbbl of a viscous oil ranging in gravity from 12º API in the
South of the reservoir to 17º API in the North. In planning the Pilot
development, Orcadian has selected polymer flooding and wind power to
transform the production of viscous oil into a cleaner and greener process.
Polymer significantly reduces fluid handling requirements and hence energy
consumption as well as boosting recovery. Ithaca Energy, operator of the
Captain field in the Inner Moray Firth, has enjoyed consistent success in
applying polymer flood to the highly analogous Captain field. The Pilot
project is now under the stewardship of Ping Petroleum UK PLC ("Ping") and is
intended to be amongst the lowest carbon emitting oil production facilities in
the world.

Ping is progressing a low-emissions, phased, field development plan for Pilot
based upon a polymer flood of the reservoir, a Floating Production Storage and
Offloading vessel (FPSO) and provision of power from a floating wind turbine
or a local wind farm.

Orcadian has an 18.75% fully carried interest in licence P2244 (block 21/27a)
and a 100% interest in licence P2482 (blocks 28/2a and 28/3a). Ping is
operator of P2244 and the Pilot development project.

Orcadian has also been offered two licences in the 33(rd) licensing process
and expects formal issues of these licences in due course.

The Mid-North Sea High licence contains shallow gas leads Orcadian applied in
partnership with Triangle Energy, an Australian listed energy company.
Orcadian would be licence administrator and would hold 50% of the offered
licence. The Mid-North Sea High licence covers blocks 29/16, 29/17, 29/18,
29/19, 29/21, 29/22, 29/23, 29/27 and 29/28.

The Fynn licence contains a very substantial heavy oil discovery. About 88% of
the resource on a best technical case is estimated to lie within the area of
the offered licence. Orcadian has been offered a 50% working interest in the
Fynn licence to be operated by the Parkmead Group. The Fynn licence covers
blocks 14/15a, 14/20d and 15/11a.

Orcadian provides below a summary of resources across its licences and
potential licences. For licences P2244 (Pilot) and P2482 (Elke, Narwhal and
Elke satellites) the volumes are based upon the CPR prepared by Sproule in
April 2021 net of TGS royalty and including an estimate of the allocation of
production as detailed in the Pilot SPA and JOA. For the prospects on the
potential licences, Fynn (Beauly), Lowlander & Midlander, Glenlough and
Breckagh the volumes are either Orcadian management estimates or Operator
management estimates prepared in accordance with the reserve definitions
guidelines defined in the SPE Petroleum Resources Management System 2018.

 

 Asset                       Gross                                  Net                        PRMS sub-class           Phase & units      Commercial risk factor  Licence
                             1C           2C           3C           1C           2C     3C
 Pilot*                      58.4         78.8         110.5        9.8          13.6   19.7   Development pending      Oil, MMbbl         100%                    P2244

Source 2
 Pilot periphery             5.9          9.8          17.6         1.1          1.8    3.3    Development unclarified  Oil, MMbbl         80%                     P2244

Source 2 & 7
 Elke Main §                 26.0         45.5         94.9         25.7         45.0   94.0   Development on hold      Oil, MMbbl         79%                     P2482

Source 3
 Narwhal                     4.3          9.2          17.6         4.2          9.1    17.4   Development on hold      Oil, MMbbl         79%                     P2482

Source 1
 Fynn (Beauly)^              175.6        292.3        480.6        77.3         128.6  211.5  Development unclarified  Oil, MMbbl         25%                     P2634^

Source 5 & 7
 Lowlander & Midlander^      17.5         11.6         31.9         8.8          5.8    16.0   Development unclarified  Oil, MMbbl         15%                     P2634^

Source 6 & 7
 Total contingent resources                                                      204.0                                  Oil, MMbbl
 Total contingent resources factored by commercial risk                          90.9                                   Oil, MMbbl

 

 

 Asset             Gross                      Net                   PRMS sub-class  Phase & units         Geological risk factor  Licence
                   Low      Best     High     Low      Best  High
 Elke Main - West  13.0     22.8     47.5     12.9     22.5  47.0   Prospect        Oil, MMbbl            90%                     P2482

(3C outline §)
Source 3
 Elke Updip        5.5      17.5     39.0     5.4      17.3  38.6   Prospect        Oil, MMbbl            87%                     P2482

Source 1
 Elke Area 2       4.2      12.3     25.4     4.2      12.2  25.1   Prospect        Oil, MMbbl            64%                     P2482

Source 1
 Glenlough^        12.0     21.8     36.7     6.0      10.9  18.3   Lead            Gas, MMboe            31%                     P2650^

Source 4
                   72.0     131.0    220.0    36.0     65.5  110.0  Gas, bcf
 Upper Breckagh^   3.3      5.5      9.2      1.7      2.8   4.6    Lead            Gas, MMboe            55%                     P2650^

Source 4
                   20.0     33.0     55.0     10.0     16.5  27.5   Gas, bcf
 Lower Breckagh^   9.5      17.5     30.3     4.8      8.8   15.2   Lead            Gas, MMboe            20%                     P2650^

Source 4
                   57.0     105.0    182.0    28.5     52.5  91.0   Gas, bcf
 Total prospective resources                           74.4                         Oil & gas, MMboe
 Total risked prospective resources                    49.8                         Oil & gas, MMboe

 

 Source
 1       Sproule CPR 2021
 2       Sproule CPR 2021 - equity updated
 3       Sproule CPR 2021 - management modified
 4       Management estimate - Licence Application to NSTA
 5       Operator estimate - as presented to NSTA
 6       Operator - earlier Relinquishment Report & Licence Application - both for
         NSTA
 7       Orcadian management estimate of risk factor

 

 Notes
 *      Pilot field net resources include a reduced revenue interest of 10% until the
        carry is repaid
 §      Elke high case is limited to the 2C outline as we have reclassified the 3C
        extension as the Elke Main West prospect
 ^      Resources are on a licence which has been offered for award but which has not
        yet been signed

 

 

About Ping UK

Ping Petroleum UK PLC ("Ping UK") is the UK division of Ping Petroleum
Limited. Ping UK is the joint owner and operator of the Anasuria Cluster and
the Anasuria FPSO, both through the Anasuria Operating Company, a 50/50 joint
venture with Anasuria Hibiscus UK, a subsidiary of Hibiscus Petroleum Berhad.
Since 2021, Ping UK has also held a 100 per cent stake in Avalon, which lies
in block 21/6b in the North Sea. Ping UK aims to become the first organisation
to use floating offshore wind to power an FPSO in the UK, which would mark a
significant step in the energy transition.

About Ping Petroleum Limited

Ping Petroleum Limited ("Ping") is an independent oil and gas ("O&G")
upstream exploration and production company. The company focuses on shallow
water offshore production and development opportunities and currently has four
assets namely Anasuria and Avalon in the North Sea, United Kingdom ("UK") and
Meranti- and A-Clusters in Malaysia. The company is a subsidiary of Dagang
NeXchange Berhad ("DNeX"), which is listed on the Main Market of Bursa
Malaysia. For more information on the company, log on to www.pingpetroleum.com
(http://www.pingpetroleum.com) .

About Dagang NeXchange Berhad

Dagang NeXchange Berhad ("DNeX") is a global technology company operating in
three business divisions namely Technology, Energy, and Information Technology
("IT"). In Technology, the company is a leading semiconductor foundry while in
Energy, the company is making its mark in upstream exploration and production
as well as equipment supply and maintenance. In IT, the company is a leading
provider of award-winning eServices for Trade Facilitation and has a wealth of
knowledge, expertise and operational know-how in the provisioning of eServices
for Trade Facilitation, Technology Consulting and Systems Integration, as well
as Subsea Telecommunications. The company is listed on the Main Market of
Bursa Malaysia. For more information on the company, log on to
www.dnex.com.my.

 

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