Baron Oil PLC has entered into an option agreement with Corfe Energy Limited to be assigned part of its rights to farm in to UK North Sea Licence P2235, which contains the Wick Prospect. Baron's option must be exercised by 28 February 2018.
The Wick Prospect lies close to the shore of NE Scotland, 5 kilometres north and updip from the Lybster Field, which has been developed from onshore facilities. The prospect has been defined by 3D seismic mapping by Baron and others and a recent announcement by Upland Resources Limited stated it has estimated in-place P50 Prospective Resources of around 250 million barrels of oil sands of Jurassic and Triassic age (unrisked) in the licence area. The Wick Prospect will be tested by a well drilled to a total depth of 1200 metres in a water depth of 50 metres. Drilling operations are expected to commence in September 2018, at an estimated total cost of £4.2 million. Under the terms of the agreements between Corfe and the licence operator, Corallian Energy Limited, if the option is exercised by Baron and subject to necessary consents, the Company would pay 20% of the well costs (£840,000), plus £6,500 in back costs, to earn a 15% interest in the licence. Malcolm Butler is a non-controlling director and shareholder of Corfe but the proposed arrangement involves no financial benefit to Corfe and he has recused himself from Corfe's decision.
In Peru Block XXI it remains the intention of the board to drill well El Barco-3X on the Minchales trend and the Company is currently in discussions with a third party who is interested in participating in the well. The block is currently in force majeure, due to some difficulties with the local administration, but it is hoped these can be overcome shortly and the well can be drilled within the next six months. The estimated cost of this well is US$1.4 million, to a total depth of 1850 metres, and it is planned to test both a low-risk, relatively small, shallow gas play and a higher risk, higher potential oil and gas play in fractured basement.
Pursuant to the requirements of the AIM Rules for Companies, the technical information and resource reporting contained in this announcement has been reviewed by Dr Malcolm Butler PhD, BSc, FGS, Chief Executive Officer of the Company. Dr Butler has more than 45 years' experience as a petroleum geologist. He has compiled, read and approved the technical disclosure in this regulatory announcement. The technical disclosure in this announcement complies with the Society of Petroleum Engineers standard.
Bill Colvin, Chairman of Baron commented:
"As shareholders were informed at the beginning of January, following our success in securing the release of all monies held against the Z-34 Guarantee Bond the board has reviewed a broad range of possibilities to diversify the activities of the Company.
"After due consideration, the board believes that near-term drilling activities in areas where discoveries can easily and profitably be developed represent the best way forward. The Wick Prospect offers an excellent opportunity to drill a relatively low-risk well this year with significant potential and provides the possibility of early, low cost development. Success in the Wick well would provide shareholders with a meaningful uplift in the asset value of the Company. We are also in the process of evaluating another near-term drilling opportunity in the UK.
"Now that we have the funds, we will finally be able to move forward with the drilling of the El Barco well in our 100% owned onshore Peru Block XXI and we are encouraged by third party interest in the prospect. This will test a structure defined after several years of extensive geophysical work on the block, the results of which indicate a good chance of success."