EnQuest, the largest UK independent oil producer in the North Sea, is to raise its stake in the Kraken oil discovery and become the operator of some blocks in a deal worth between $150m and $240m.
The firm is to buy a 25% interest in blocks 9/2b and 9/2c, including Kraken, from Nautical Petroleum which has a gross contingent resource estimate of 160 million barrels of oil equivalents (MMboe).
If it turns out that the less than 100MMboe are in the blocks, then EnQuest will only pay $150m. If tests show more than 166 MMboe, then EnQuest will pay the maximum $240m.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The firm will also acquire surrounding exploration acreage and has the option to earn a 45% farm-in interest in block 9/1a in return for paying up to 90% of the gross cost of drilling up to two wells to appraise the Ketos discovery, which has the potential to be tied back to the Kraken field.
"EnQuest is very pleased to be able to increase its interest in Kraken and to become the future operator of the proposed development," said Chief Executive Amjad Bseisu.
"Based on the operator's estimates, this 25% interest in Kraken provides 40 MMboe of contingent resources, which when combined with the 32 MMboe of contingent resources from the 20% interest that EnQuest acquired earlier this month from Canamens, adds almost 70% to EnQuest's end 2010 contingent resources," Bseisu said.
Following this transaction EnQuest will have a 45% interest in blocks 9/2b, 9/2c, 9/6a and 9/7b, and a 55% interest in blocks 3/22a and 3/26. EnQuest will also have a 45% interest in block 9/1a, subject to exercising the option to farm-in.
-
FTSE 100 hits record highs – why is it rising and will we see more gains?Advice UK equities have been described as unloved for a long time but as the FTSE 100 hits new highs, we explain if now is the time to buy British.
-
How to invest in copperIt may be time to invest in copper as the red metal appears poised for a big jump. Dominic Frisby looks at what should investors should buy
