UK player seeking farm-down of high-graded assets in its North Sea basket

AIM-listed oil and gas company Reabold Resources plc has undertaken a high-grading exercise of its North Sea licences and plans to farm down its stake in retained assets while some of its UK licences will be dropped.

According to Reabold Resources, the high-grading exercise of its North Sea licences was done in the context of its ongoing disciplined approach to capital allocation, which has led to the prioritisation of the highest potential return assets in the board’s view. 

While the Northern North Sea set of licences was acquired for £0.25 million (over $0.32 million) in May 2022, the Southern North Sea batch of licences was acquired for around £1 million (nearly $1.3 million) in January 2023, as part of the firm’s acquisition of Simwell Resources Limited.

Reabold Resources reveals that an extension has been granted for licence P2478 – the company holds a 36 per cent stake in Dunrobin and Golspie – in Inner Moray Firth until July 2025, which has aggregate gross unrisked Pmean prospective resources of 201 mmboe.

The company’s 100 per cent owned licences P2605 West of Shetland – Laxford and Scourie –  and P2504 in East Shetland Basin – Oulton and Oulton West – have been retained as the firm continues the farm-out process, prior to a drill or drop decision by November 2024.

Furthermore, these licences have aggregate gross unrisked Pmean prospective oil resources of 38 Mbbls and aggregate gross unrisked Pmean prospective gas resources of 148 Bscf, in addition to 11Mbbls of oil and 15 bcfg 2C contingent resources.

On the other hand, three 100 per cent owned licences – P2396 (Curlew-A), P2464 (Quoys and Unst) in East Shetland Basin, and P2493 North of Shetland (Sandvoe) – have been or are due to be relinquished shortly.

Reabold confirms that the licence P2486 has been retained in its Southern North Sea portfolio, as the operator continues the farm-out process, prior to a drill or drop decision by July 2024.

However, Shell, the operator of licence P2332, which is adjacent to the licence containing the Pensacola well, made a decision to relinquish the licence. Additionally, licences P2329 and P2427 have been or are due to be relinquished shortly.

The company claims that the work undertaken on all its Southern North Sea licences provided valuable data, enabling more insight into the Zechstein play, which the firm sees as fundamental to its West Newton and Crawberry Hill assets onshore.

Sachin Oza, Co-CEO of Reabold, commented: “With an abundance of value opportunities within Reabold, the high-grading of our recently acquired North Sea licence portfolio is driven by the board’s disciplined financial framework, where the highest return opportunities have been prioritised. We will look to farm down these high-graded assets to help fund the de-risking and value creation process.”

Reabold sold its investee company, Corallian Energy Limited (CEL), to Shell in November 2022, enabling the oil major to add a gas field located West of Shetland to its asset portfolio.

At the time, Reabold planned to use the net proceeds received to advance the development of its existing assets, including the drilling of a horizontal well at West Newton, and assess further potential acquisition opportunities.