Dart Energy, GDF SUEZ UK Sign Farm-Out Agreement

Dart Energy announced that it has entered into a farm-out agreement relating to thirteen of its U.K. licences with GDF SUEZ E&P UK Ltd. This comprises part of a broader strategic cooperation n relation to unconventional gas being implemented between the two companies at the same time.

GDF SUEZ E&P UK is a wholly owned subsidiary of GDF SUEZ, a Paris-headquartered global energy group, with a significant exploration and production presence in the U.K, in particular as operator of Cygnus, one of the largest undeveloped gas fields in the Southern North Sea discovered in the last 25 years.

GDF SUEZ is the number one independent power producer in the world, and is listed on the Paris, Brussels and Luxembourg stock exchanges, has annual revenues in excess of US$120 billion, and employs more than 130,000 employees worldwide. GDF SUEZ E&P UK is one of the UK’s leading operators with a reputation for safe and responsible exploration and production activities.

Key aspects of the farm-out are:

• The farm-out relates to thirteen licences (out of a total of 31) held by Dart in the U.K. All farm- out licences are in England / Wales, in both the western and eastern parts of the Bowland Basin, an area considered highly prospective for unconventional gas. A recent study by the United Kingdom Department of Energy and Climate Change and the British Geological Survey estimates shale gas resource potential in the Bowland Basin ranging between 822 Tcf (low estimate) to 2,281 Tcf (high estimate) with 1,329 Tcf as the best estimate.
• Dart is currently the operator of these licences and holds a 100% interest in each. GDF SUEZ E&P UK will acquire a 25% working interest in each licence. Dart will retain a 75% interest and operatorship of each licence.
• The licences subject to the GDF SUEZ E&P UK farm-in cover a total area of 1,378km2 (340,510 acres), representing approximately 38% of Dart’s total U.K. acreage. The transaction effectively reduces Dart’s net acreage by approximately 10%.
• As consideration for the interest acquired, GDF SUEZ E&P UK will pay to Dart US$12 million in cash, and meet Dart’s 75% share of costs up to US$27 million (as well as meet GDF SUEZ E&P UK’s 25% share). The funding will support an agreed unconventional exploration and appraisal program over a three year period, including drilling up to four shale gas exploration wells in different areas of the Bowland basin and ten Coal Bed Methane (CBM) exploration wells.
• The farm-out is subject to customary conditions precedent, including approval of the UK Department of Energy & Climate Control (“DECC”) to the transfer of working interest in the licences to GDF SUEZ E&P UK.
• On completion, Dart will have gross acreage of 2,481 km2 in the Bowland basin, and net acreage of 2,047 km2. Netherland Sewell & Associates Inc (“NSAI”) previously certified 60TCF of shale GIP (best estimate) and 4.56TCF of CBM 3C Contingent Resource across the 13 blocks subject to farm-out.

Alongside the farm-out, Dart and GDF SUEZ have established a broader strategic cooperation between the two companies, focussed on unconventional gas activities (and especially shale). This includes provision of various support services from GDF SUEZ and partner company SUEZ Environnement in the field of environmental service and water management, and the sharing of best practice.

Commenting, John McGoldrick, Dart Chief Executive Officer said: “The level of interest in U.K. unconventional gas is growing almost daily. Dart holds one of the U.K.’s largest unconventional acreage positions, and today’s agreement represents a significant development for Dart. We will receive US$12 million in cash, but more importantly Dart will be funded into a substantial work program consisting of up to 4 shale and 10 CBM wells aimed at establishing the viability of both shale and CBM on 13 of our Bowland licences, at the same time retaining a 75% interest and operatorship. We are especially pleased that our new partner is GDF SUEZ, a group with significant capabilities, extensive experience and existing businesses across the gas value chain in the U.K. and internationally. We see enormous value in the broader strategic cooperation being implemented between our companies, and we welcome GDF SUEZ’S entry into onshore U.K. unconventionals, bringing valuable expertise at a critical time for the gas industry in this country”.

Commenting, Jean-Marie Dauger, Executive Vice-President, GDF SUEZ, in charge of the Global Gas & LNG Business Line, said: “We are very confident about the potential of shale gas in the U.K., and its anticipated contributions to U.K. energy security. GDF SUEZ is pleased to enter this first investment in UK shale gas as it complements the large presence of the Group in the U.K. We look forward to working with our partner, Dart Energy, to unlock the potential of these licences”.

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LNG World News Staff, October 22, 2013; Image: Dart Energy