With UK fiscal challenges ‘undermining investor confidence,’ sale of North Sea discovery falls through due to lack of money
UK-headquartered oil and gas company Quattro Energy Limited has been unable to secure the required funds for the acquisition of United Oil & Gas’ license in the Central North Sea, which includes an existing hydrocarbon discovery.
According to United Oil & Gas, Quattro has been unable to raise funds to complete the transaction, against the backdrop of the current regulatory and fiscal challenges impacting the UK North Sea, which are “undermining investor confidence in the progression of potential developments in this sector,” notwithstanding the prospectivity of this license. As a result, the company confirmed the termination of the asset purchase agreement (APA) with Quattro under which the parties had agreed to the conditional sale of the UK Central North Sea license P2519 containing the Maria discovery in Block 15/18 in the Outer Moray Firth Basin.
This comes after United announced that the long stop date for the satisfaction of the APA conditions had been further extended to October 27, 2023. Whilst the regulatory consent for the transfer of the license had been approved, Quattro had not satisfied the funding conditions under the APA by the extended long stop date and the parties have not agreed to a further extension. The current phase of the license expires on November 30, 2023, and a firm commitment to drill a well in the next phase of the license is required to continue beyond this date.
Even though United recognizes the potential prospectivity of a development in this license – having exhausted all other available avenues to progress this opportunity – the company has made the decision not to apply to move into the next phase of the license. Therefore, the firm’s interest in this license is expected to cease on November 30, 2023.
Brian Larkin, United Oil & Gas’ Chief Executive Officer, commented: “We had identified our interest in the Maria license as non-core to our future strategy and on that basis undertook a farm-out process which resulted in the agreement to sell to Quattro on the terms announced in January this year. Since signing this agreement with Quattro, we have sought to support their efforts to raise the funds required to complete this transaction and had regular interaction with the Quattro team and their advisors as they progressed their funding process.
“It is therefore a disappointing outcome for both parties, that due to the challenging regulatory and fiscal backdrop in the North Sea, Quattro were unable to complete their funding process. Throughout the last 12 months, the company has incurred only license costs in relation to the Maria license, the cost of which is effectively covered by the $100k non-refundable deposit received in September. Our focus remains on progressing the farm-out of Jamaica and the upcoming drilling activities in Egypt including the drilling of the ASD-S-1X exploration well later this year.”
United was awarded the license P2519 in December 2020. The Maria discovery, which is located within this license, includes Blocks 15/18e and 15/19c, covering an area of approximately 225 km2, close to existing infrastructure in the Central North Sea. The license has an independently audited mid-case 2C gross contingent resource estimate of 6.3 mmbbls and 23.3Bcf (10.2 mmboe).
The area encompasses the Marigold and Yeoman discoveries, where significant development activity is taking place, and the Piper, MacCulloch, and Claymore oil fields. The Maria discovery within the Upper Palaeocene Forties Sandstone was discovered by Shell/Esso in 1976 while drilling for deeper, Piper-equivalent targets, but at the time was not considered commercially viable.