THE INFORMATION CONTAINED WITHIN THIS
ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE
INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU)
NO. 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW PURSUANT TO THE
EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION
SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC
DOMAIN.
12 December 2024
Orcadian Energy plc
("Orcadian" or the
"Company")
Farm-out of Earlham and
Orwell
Assignment of Shell
Loan
Highlights
·
Agreement of commercial terms for the sale of a 50% interest
in Earlham and Orwell to MLCP and a carry arrangement to bring
Earlham and Orwell into production
· Shell
loan assigned to IPCNWE and loan terms restructured
· IPCNWE
loans to be paid in full upon completion of assignment of Earlham
and Orwell to MLCP
· Orcadian
retains a 50% carried interest in the Earlham and Orwell
projects
Orcadian (AIM:ORCA) is delighted to announce
that the Company has agreed to sell a 50% interest in a sub-area of
Licence P2680 to The Marine Low Carbon Power Company Ltd
("MLCP"). MLCP plan to
develop Earlham and Orwell to supply the first of MLCP's Mobile
Offshore Generating Units ("MOGU"), which will
in turn supply carbon free energy to MLCP customers and to IPC New
World Energy Ltd's ("IPCNWE") battery
projects.
MLCP is a joint venture company owned by IPCNWE
and Richmond Offshore Energy Ltd. IPCNWE is part of the
Independent Power Corporation PLC ("IPC") group and is the largest
developer of consented battery projects in the UK with 5.5 GW of
capacity under development. MLCP has designed, in conjunction with
GE Vernova and Capsol Technologies of Norway, a 300 MW offshore
power facility with integrated carbon dioxide capture and
distributed carbon dioxide storage offshore in a reservoir, most
likely within the Licence P2680 sub-area.
Shell
Loan
As part of the overall arrangements IPC has
acquired the loan advanced by Shell International Trading and
Shipping Company Limited ("Shell") to Orcadian Energy (CNS) Ltd in
August 2019. The amount owed to IPC and IPCNWE is US
$1.5 million. IPCNWE has agreed to convert US $1.4 million of
this into funding part of the consideration for MLCP to acquire its
50 per cent stake in Earlham and Orwell. The balance of US
$100,000 will be exchanged for an Orcadian loan note, dated 30 June
2026, and convertible into approximately 312,500 Ordinary shares in
Orcadian at a conversion price of 25 pence per share, Orcadian may
require conversion of the loan note into Ordinary shares if
Orcadian's volume weighted average share price ("VWAP") in each of
five consecutive trading days is 35p or above.
Farm-out
Terms
Orcadian has agreed the key terms of a farm-out
agreement for a sub-area of Licence P2680 with MLCP. The principal
terms of the agreements have been documented in a non-binding Heads
of Agreement which defines the entire suite of agreements that need
to be finalised.
It is intended that the farm-out will be
implemented as follows:
· MLCP
will acquire from Orcadian a 50% interest in the Earlham discovery
and Orwell field redevelopment by acquiring a 50% interest in a
sub-area of Licence P2680, comprising blocks 50/26 and
49/30b.
· Orcadian
will act as Licence Administrator through the Assessment Phase and
MLCP will become Licence Administrator for the Authorisation phase
which includes the preparation and submission of the Field
Development Plan ("FDP") and the
Environmental Statement.
· It is
intended, subject to approval from the North Sea Transition
Authority ("NSTA
approval"), that on FDP approval MLCP will
become Licence Operator for the project execution and operating
phases of the project.
· This
transaction is subject to NSTA approval and will be documented in a
fully termed Sale and Purchase Agreement and a Joint Operating
Agreement;
· The purchase price of 50% of the
sub-area of Licence P2680 has been agreed to be US $2.2m, with US
$1.4m payable on completion and two tranches of US $400,000 payable
on achieving fuel gas quality production rates in excess of 50
MMscf/day for a 48 hour period, both 30 days after first gas and
120 days after first gas.
· Together
with the convertible loan arrangements noted above, the payment
upon completion will offset in full the amounts owed by Orcadian to
IPC and IPCNWE;
· MLCP
will carry Orcadian's share of expenditure through to first gas on
the development of Earlham and Orwell;
· The
carry will be repayable through MLCP having an enhanced revenue
interest of 80% until the carry is fully repaid;
As a consequence of these arrangements,
Orcadian will retain a 50% carried interest in the development of
Earlham and the redevelopment of Orwell, and its debts to Shell and
IPCNWE will be paid in full.
This is a provisional agreement and there can
be no guarantee that the transactions will all complete. Any deal
is subject to, amongst other matters, completion of due diligence,
negotiation of detailed documentation, and various regulatory
consents as well as the Board approvals of MLCP and Orcadian. The
parties hope to complete the transaction during 1Q 2025.
Earlham and
Orwell
Earlham has a methane resource of 114 bcf and
the Company believes Orwell could deliver a further 31
bcf.
The Earlham discovery is a high-quality Leman
sand accumulation with high net to gross (c. 95%), porosity of 18%
and permeability of c. 250 mD. The field was discovered in 1995 by
Talisman and in 1996 BP drilled a high angle appraisal, and
intended development, well with a 1,559m section in the gas pay
zone. In line with our strategy this is a field with high quality
reservoir rocks. BP curtailed the well test and abandoned the well
because of the high CO2 content in the gas.
Development and production of the gas in
Earlham is relatively straightforward given the high-quality
reservoir, as no well stimulation will be required. Locating the
MOGU offshore at the Earlham site dispenses with both a
CO2 disposal pipeline from shore and a natural gas
pipeline, the wells being located on an adjacent bridge-linked
wellhead structure.
To enable this, Earlham gas will utilise a MOGU
based pre-combustion CO2 removal system to reduce the
CO2 content to a level which is acceptable for
combustion within the LM-6000 gas turbines selected by MLCP. The
captured pre-combustion CO2 will then be combined with
the post-combustion captured CO2 using the Capsol
Technologies' system. The combined CO2 stream will then
be reinjected into either Earlham, Orwell or a nearby licensed
CO2 reservoir.
It is intended that the Earlham and Orwell
developments provide the gas supply and the carbon storage
reservoirs for the MOGU development, subject to NSTA approval. MLCP
is exploring opportunities to share offshore cable and grid
connections with nearby wind farms.
Steve Brown,
Orcadian CEO, said:
"The development of Earlham is intended
to be the first of a number of MLCP led zero carbon energy projects
which will integrate gas-to-wire and carbon capture and storage
technologies to provide zero carbon balancing power which is
desperately needed if the United Kingdom is to meet its net zero
obligations.
"These
projects are designed to proceed without requiring any government
subsidy since MLCP will sell power directly to customers who value
reliable, carbon free electricity which is available when renewable
energy is not available or in short supply. There is no need to
create a business model for CO2 storage nor to rely on
government to sanction financial support for the project. This
should enable an early commitment to the Earlham
development.
"Earlham will
be the first gas field on the UKCS to be dedicated to a facility
that will capture practically all the emitted carbon dioxide for
storage underground. Scope 3 emissions will be less than 5% of a
conventional gas development which supplies an unabated power
station. This project is one which we believe supports the
government's vision of a clean UK power system in 2030 whilst
crucially also delivering on the government's energy security
goals."
For further information on the Company please
visit the Company's website: https://orcadian.energy
Contact:
Orcadian Energy
plc
|
+ 44 20 7920 3150
|
Steve Brown, CEO
Alan Hume, CFO
|
|
Zeus (Nomad and
Joint Broker)
|
+44 20 3829 5000
|
Dan Bate / Alex Campbell-Harris (Investment
Banking)
Simon Johnson (Corporate Broking)
|
|
Novum (Joint
Broker)
|
+44 207 399 9425
|
Colin Rowbury / Jon Belliss
|
|
Tavistock
(PR)
|
+ 44 20 7920 3150
|
Nick Elwes / Simon Hudson
|
orcadian@tavistock.co.uk
|
Qualified
Person's Statement
Pursuant to the requirements of the AIM Rules
and in particular, the AIM Note for Mining and Oil and Gas
Companies, Maurice Bamford has reviewed and approved the technical
information and resource reporting contained in this
announcement.
Maurice has more than 35 years' experience in
the oil & gas industry and 3 years in academia. He holds a BSc
in Geology from Queens University Belfast and a PhD in Geology from
the National University of Ireland. Maurice is a Fellow of the
Geological Society, London, and a member of the Geoscience Energy
Society of Great Britain. He is Exploration and Geoscience Manager
at Orcadian Energy.
About Orcadian
Energy
Orcadian is a North Sea focused, low emissions,
oil and gas exploration and development company. Orcadian may be a
small operator, but it is also nimble, and the Directors believe it
has grasped opportunities that have eluded some of the much bigger
companies. As we strike a balance between Net Zero and a
sustainable energy supply, Orcadian intends to play its part to
minimise the cost of Net Zero and to deliver reliable energy to the
UK.
Orcadian's key asset is the Pilot oilfield,
Pilot was discovered by PetroFina in 1989 and has been well
appraised. The field has excellent quality reservoir and contains
263MMbbl of a viscous oil ranging in gravity from 17º API in the
South of the reservoir to 12º API in the North. In planning the
Pilot development, Orcadian has selected polymer flooding and wind
power to transform the production of viscous oil into a cleaner and
greener process. Polymer significantly reduces fluid handling
requirements and hence energy consumption as well as boosting
recovery. Ithaca Energy, operator of the Captain field in the Inner
Moray Firth, has enjoyed consistent success in applying polymer
flood to the highly analogous Captain field. Following the recent
farm-down of Pilot, the project is now under the stewardship of
Ping Petroleum UK PLC ("Ping") and is intended to be amongst the
lowest carbon emitting oil production facilities in the
world.
Ping is progressing a low-emissions, phased,
field development plan for Pilot based upon a polymer flood of the
reservoir, a Floating Production Storage and Offloading vessel
(FPSO) and provision of power from a floating wind turbine or a
local wind farm.
Orcadian has an 18.75% fully carried interest
in licence P2244 (block 21/27a) and a 100% interest in licence
P2482 (blocks 28/2a and 28/3a). Ping is operator of P2244 and the
Pilot development project.
Orcadian was awarded three licences in the
33rd round. The Mid-North Sea High licence, P2650,
contains shallow gas leads. Orcadian applied in partnership with
Triangle Energy, an Australian listed energy company. Orcadian is
licence administrator and holds 50% of the offered licence. The
Mid-North Sea High licence covers blocks 29/16, 29/17, 29/18,
29/19, 29/21, 29/22, 29/23, 29/27 and 29/28.
The Fynn licence, P2634, contains a very
substantial heavy oil discovery. About 88% of the resource on a
best technical case is estimated to lie within the area of the
offered licence. Orcadian has a 50% working interest in the Fynn
licence which is operated by the Parkmead Group. The Fynn licence
covers blocks 14/15a, 14/20d and 15/11a.
The SNS licence, P2680 100% Orcadian, contains
the Earlham discovery, a low-calorie gas discovery with 114bcf of
methane resources on a P50 basis, the Clover prospect which has P50
prospective resources of 153bcf, and the decommissioned Orwell
field which has redevelopment potential, alongside a number of
smaller prospects.
About IPC New
World Energy Limited
IPC New World Energy Ltd is a subsidiary of
Independent Power Corporation PLC ("IPC") which since 1995 has been a
developer, owner and operator of power plants on five continents
across the globe. IPC has developed, owned or operated around
10,000 MW of conventional power capacity across a wide range of
project types including gas, diesel, wind, biofuels and hydroelectric plants. Thermal
plants have included combined cycle gas turbine (CCGT) power plants
(including the first in country in Bolivia and South Africa) as well as combined
heat and power (CHP) projects and emissions reduction projects in
CIS countries. In recent years, IPC has developed projects in
Azerbaijan, Chile, Ghana and the United Kingdom as an independent developer, sponsor and
operator of power plants. Its IPCNWE subsidiary has in excess of
7.5 GW of offshore wind and BESS battery storage projects in the
United Kingdom and Europe.
About the
Marine Low Carbon Power Company Limited
MLCP was formed in 2020 to generate low carbon
balancing power in UK territorial waters using offshore gas
reserves. The energy can be generated flexibly to provide carbon
free energy when wind and solar energy sources are unavailable,
therefore supporting and complementing UK renewable energy - unlike
CCGT baseload gas fired power plants which compete with renewables
and which do not have the operational ability to stop and start at
short notice.
MLCP is a joint venture between IPC New World
Energy Ltd and Richmond Offshore Energy Ltd.