Baron Oil (AIM: BOIL) provides an update on the proposed drilling of the Colter and Wick wells, on UK Continental Shelf Licence P1918 (UKCS Block 98/11a) and P2235 (UKCS Block 11/24b) respectively.
Colter well (increase from 5% to 8% working interest)
The Company announces that it has agreed to an amendment of the Farmout Agreement with Corallian Energy Limited (“Corallian”) under which it will now earn an 8% working interest in UK Continental Shelf Licence P1918, which contains the Colter Prospect. The Colter well is planned to be drilled in the fourth quarter of 2018, subject to regulatory approvals, following the Wick well. Under the amended terms of the Farmout Agreement with Corallian, and subject to the necessary consents, the Company will fund 10.67% of the costs related to the Colter well, capped on a pro-rata basis at a gross cost of £8.0 million. Any incremental costs above this cap will be funded by the Company at 8%.
An Authorisation for Expenditure (“AFE”) for the Colter well has now been signed for a total estimated cost of £7.5 million on a dry hole basis, including £0.4 million of back costs (a total of £0.8 million net to Baron).
Wick well (15% working interest)
In addition, an AFE with a total estimated cost of £5.7m on a dry hole basis, including £0.5 million of back costs (a total of £1.1 million net to Baron), has been signed for the drilling of the Wick well. The Company will fund 20% of the costs related to the Wick well, capped on a pro-rata basis at a gross cost of £4.2m, with the incremental costs above this cap funded by the Company at 15%. The current target for commencement of drilling of the Wick well on UK Continental Shelf Licence P2235 is September 2018, subject to regulatory approvals.
Malcolm Butler, Chairman and CEO of Baron commented:
“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 material drill targets for Baron and we are delighted to have had the opportunity to increase our Working Interest in the Colter Well to 8%.”