A number of London-listed junior oil and gas firms embraced a milestone development in the drilling of key wells at the much-anticipated, UK-based Wick and Colter prospects today.
Corallian Energy, the private business that operates both Wick and Colter and owns a 40pc and 45pc stake in them respectively, revealed that an Authorisation for Expenditure (AFE) has been signed at both prospects. An AFE is a budgeting and approval form used in the final part of the planning process for a well that is about to be drilled and includes an estimate of total costs.
At Colter, the form has been signed for a total estimated cost of £7.5m on a dry hole basis, including £400,000 of back costs. Subject to final regulatory approvals, a well will now be drilled at Colter – located 2km south of the highly-successful Wytch Farm oilfield in Dorset – in the fourth quarter of 2018. Corallian has estimated a gross mean prospective resource of 30 million barrels of recoverable oil in the Colter appraisal opportunity, with a gross NPV in the success case of £255 million.
Meanwhile, at Wick, an AFE has been signed with a total estimated cost of £5.7m on a dry hole basis, including £0.5m of back costs. A well will now be drilled at the Inner Moray Firth-based site in September, pending final regulatory approvals, looking to target P50 Prospective Resources of around 50MMboe in both Jurassic and Triassic aged sands.
As one of the final stages of pre-drill planning for both prospects, today’s news was welcomed with open arms by numerous parties involved alongside Corallian, including several publicly-traded London oil juniors.
Despite seeing its shares dip 2.4pc to 0.8p, Reabold Resources (LSE:RBD) – which owns a 32.9pc stake in Corallian – said it looks forward to drilling the ‘potentially transformational’ wells over the coming months.
Stephen Williams, co-chief executive of the business, said: ‘Colter and Wick form an exciting part of our six well drilling campaign in H2’18. We are very pleased to note that following our initial funding of Corallian late last year, a number oof partnershave followed into both the Colter and Wick prospects, giving us two fully funded wells at significant equity levels.’
Meanwhile, Baron Oil (LSE:BOIL) announced that it had increased its working interest in Colter to 8pc while maintaining a 15pc working interest in Wick. The firm – which saw its shares inch up 2pc to 0.5p – will fund 10.7pc of the costs related to Colter, capped on a pro-rata basis at a gross feeof £8m. It will also fund 20pc of the costs of Wick, capped at £4.2m.
Malcolm Butler, chairman and chief executive of Baron, said: ‘We are pleased to have moved each of the Colter and Wick wells to a committed AFE stage. We note that costs have increased as final estimates of rig and service rates have been obtained and the joint venture will maintain pressure on the drilling management team to deliver the wells within the new budget limits. Both of these wells are materialdrill targets for Baron andwe are delighted to have had the opportunity to increase our working interest in the Colter Well to 8pc.
Upland Resources (LSE:UPL), which owns a 40pc working interest in Wick and will fund c.53pc of the costs related to the well capped at £4.2m, saw its shares slip 1.6pc to 3.2p in morning trading. Despite this, chief executive Steve Staley heralded today’s development:
‘We are very pleased to announce that Upland UK, alongside our partners in the Wick well, have signed the AFE for the well as we move toward commencing drilling in September 2018. Thisis a very importantstep as we look forward to realising the potential of this high impact exploration well. We will update our shareholders on progress in due course.’
Finally, United Oil & Gas (LSE:UOG), which owns a 10pc stake in Colter and is responsible for around c.£1m of its costs, received the newswarmly, adding that the prospect could ‘generate high reward’ for investors. Shares fell 4.3pc to 5.3p in morning trading.
Chief executive Brian Larkin, said: ‘The Colter well remains on track to be United’s second well since the Company’s Readmission in July 2017. As with the successful Podere Maiar gas discovery in Italy, Colter has an excellent address, being locatedclose to Europe’s largest onshore oil field; is targeting an historic discovery that has significant upside; andhas good access to infrastructure. Colter may be a low riskappraisal play butwith independently assigned contingent resources of 4mmbbls and additional gross prospective resources of 15mmbbls, it has the potential to generate high reward for United shareholders. I look forwardto providing further updates on activity not only at Colter,but across our portfolio of near-term, low-risk development opportunities in Europe and higher-risk, high-impact exploration in Jamaica, during what promises to be an exciting period for United.’