Several oil juniors were trading down this morning after the UK government decided not to renew the lease at the proposed site for a well to test the highly anticipated Holmwood oil prospect in Surrey’s Weald Basin.
Europa Oil & Gas (LSE:EOG), operator and 20pc owner of PEDL143 where Holmwood is based, said the Minister for the Environment, Food and Rural Affairs told it the lease at Bury Hill Wood will expire next week. The firm, which was down 2.7pc to 3.7p as at the time of writing, said it will now withdraw its planning application to drill the Holmwood prospect from Bury Hill Wood on behalf its partners at PEDL143.
Holmwood is predicted to have conventional Jurassic sandstone and limestone reservoirs that have been proven productive at the nearby Brockham oil field and Horse Hill oil discovery. The Holmwood prospect has been assigned gross mean prospective resources of 5.6MMboe with a range of 1-11MMbbls. If it were to come in at 5.6MMboe, Holmwood would be the fifth largest onshore oil field in the UK.
With PEDL 143 recently being extended until 30 September 2020, Europe said it now intends to undertake a full evaluation of alternative sites where it can target the Holmwood prospect and other plays in the licence. The firm’s chief executive Hugh Mackay added:
‘The minister’s decision not to renew the lease at Bury Hill Wood is disappointing, however, we intend to continue to work closely with our partners to determine how best to take the licence forward. Europa holds a multistage portfolio of licences which includes production and appraisal projects onshore UK and an industry leading licence position in the Irish Atlantic Margin.’
Europa’s partners on the licence were also hit. For example, Egdon Resources (LSE:EDR), which owns an 18.4pc stake in PEDL143, was down 7.4pc to 8p in morning trading. Mark Abbot, managing director of the business, said:
‘The Minister’s decision is highly frustrating. However, we note the commitment of the operator to evaluate alternative sites and we will work with Europa and the joint venture partners to agree a forward plan for the licence. Meanwhile we will continue to progress our plans across our broad and extensive portfolio of UK projects.’
Union Jack Oil (LSE:UJO), 8.3pc owner of the licence, fell 8.3pc to 0.092p on the news. However, executive chairman David Bramhill attempted to shrug off the potential impact of the expiration, saying:
‘The potential consequences of the Minister’s decision are minimal for Union Jack as it holds a balanced portfolio of ten attractive onshore licence interests in the UK, including producing assets at Keddington and Fiskerton, a development project at Wressle and a planned well at Biscathorpe to be drilled during October/November 2018.’
Meanwhile, Angus Energy (LSE:ANGS), a 12.5pc stakeholder in PEDL143 dropped 4.4pc to 7.1p after noting Europa’s announcement. Interestingly, UK Oil & Gas (LSE:UKOG), the business with the most substantial interest in Holmwood at 40pc, did not issue a response to news of the lease expiring. Shares fell 2.9pc to 2.3p in morning trading.