Deltic Energy has completed its farm out of five North Sea gas licences to Cairn Energy.
The quintet of prospects include P2428, which Deltic previously described as “the next Cygnus” for its similarity to the UK’s largest-producing gas field.
Deltic and Cairn have now received approvals from the Oil and Gas Authority (OGA) for the deal, announced in August, and has entered into joint operating agreements.
Under the terms, Cairn has paid Deltic $1million by way of contributing to historic back costs, and has agreed to pay 100% of an agreed work programme for each licence until a drill or drop decision is made.
Cairn now holds 60% of P2428 (Cupertino Area) and P2567 (Cadence) and 70% in licences P2560, P2561 and P2562, which are located between the Breagh and Tolmount Gas Fields, and become operator of each.
Deltic retains the remaining stakes in each licence.
Following a drilling decision being made on Cupertino or Cadence, Cairn will fund 70% of costs on whichever is drilled first, subject to cap of $25m.
Since announcing the farm-out in August, seismic survey work has begun in the Cupertino area which is expected to be completed before the end of November with processed data due to be delivered in the second quarter of 2022.
Deltic chief executive Graham Swindells said: “Completion of this transformational multi-licence farm out marks the formal commencement of our partnership with Cairn which will see significant investment being made in Deltic’s strategic Southern North Sea gas exploration portfolio. Ahead of completion of the transaction we have already begun working with Cairn to progress activities on the licences.
“I am particularly pleased that the new 3D seismic survey has commenced so quickly after announcement of the farm out, demonstrating a shared commitment to immediately accelerate the development of these licences and hence timeline to potential drilling.
“We look forward to building our partnership with Cairn, as we continue to develop our conveyor belt of Southern North Sea gas prospects towards drilling.”
The deal comes as Cairn completed the sale of its stakes in the Kraken and Catcher fields in the North Sea last week in the £330million deal.
The company has also announced a name change to Capricorn Energy, effective from December 13.