Orcadian Energy has confirmed Ping Petroleum has become its farm-in partner on the Pilot field, concluding long-running negotiations over the future of the North Sea development.
Orcadian (AIM:ORCA) first announced in September it had entered into a non-binding heads of agreement with an unnamed North Sea operator on a potential farm-in to the £1bn central North Sea project.
On Thursday it confirmed that party is Ping Petroleum, who will now take on an 81.25% operated interest in the flagship asset in licence P2244 – one of the largest undeveloped discoveries in the region and thought to contain around 79 million barrels.
Orcadian said value of the sale totalled $3.1 million, though also includes the payment of historic costs incurred by the company to date. It also remains conditional on Orcadian shareholder approval.
A proposed joint operating agreement will see the firm retain its 18.75% interest in the development, with Ping paying 100% of the pre-first oil scope of work.
An initial consideration of $100,000 is payable on completion of the transferring of the licence via the North Sea Transition Authority (NSTA), anticipated to occur before the end of March 2024.
Ping will then pay the $3m balance following the regulator’s approval of a field development plan (FDP) for the field – currently set for submission “during 2024.”
Orcadian said further updates would be provided as this progresses.
Orcadian, which made its IPO in London in 2021, has devised a novel method for developing Pilot using a polymer flooding technique to boost recoverable barrels and powered by a floating wind turbine.
Under the plan, 34 wells would be drilled via a jack-up rig through a pair of well head platforms, though the company has long acknowledged the need for a partner to take the project over the line.
Orcadian CEO Steve Brown noted that Ping already owns the Excalibur FPSO -formerly Hummingbird Spirit – for use in its Avalon development and has “engaged with the owners of a number of floating production storage and offloading (FPSO) redeployment candidates”.
As a result he hoped the firm “can identify the right solution for Pilot very quickly.”
Orcadian also recently secured an extension to the P2244 licence, adding a further two years to its second term, which will now expire on November 30, 2025.
Under the terms of the deal Ping will acquire net reserves or resources of 63.4 million barrels on completion of the deal, while Orcadian retaining 14.6 million barrels, carried to first oil.
The company also pointed to “significant upside potential” around the field, and confirmed the partners are currently negotiating a joint bidding agreement to request an out-of-round application for the area of former licence P2320 – which Orcadian was forced to relinquish earlier this year – in support of the Pilot development and area plan.
Mr Brown added: “We are delighted to have executed this agreement with Ping and look forward to completing the documentation and receiving all the necessary approvals so that the deal can complete before end 1Q 2024.
“We believe this deal will be transformational for Orcadian. Not only does it set out a clear pathway to production for the Pilot field, but also provides a number of opportunities, which we are excited about, in the wider Western Platform area which this partnership will enable us to grasp.
“We have been impressed with Ping’s commercial agility and technical ability, and we look forward to working with the Ping team to deliver a successful Pilot development.”
Ping making plays
A subsidiary of Malaysian-listed Dagang NeXchange (DNeX), Ping has a North Sea business based in Aberdeen-based firm as well as a Malaysian production arm, and is one of a series of ventures made by its parent group in technology and IT.
The deal is the next in a series of recent farm-ins, including a deal to co-develop the Fyne field, after the company and its cluster partner Hibiscus Petroleum announced in September they had each entered into “separate but identical” farm-in agreements with Rapid Oil.
These plans would see a one-well development brought online in 2026.
Meanwhile, it is also progressing its Avalon development using the newly refurbished Excalibur FPSO.