KeyFacts Energy: Baron Oil UK country profile   l   KeyFacts Energy: Farm-in agreements

Baron Oil, the AIM-quoted oil and gas exploration company, has increased its interest in United Kingdom Offshore Licence P2478 from 15% to 32%, conditional on approval from the UK Oil and Gas Authority ("OGA").

Key Points

• More than doubling of Baron's interest, to 32%, in the prospective Dunrobin area
• Dunrobin evaluated as one of the few remaining sizeable undrilled UK North Sea targets
• Accelerated seismic reprocessing is now due for delivery in early 2022 ahead of engagement with potential drilling partners
• Builds on earlier work sharing agreement which enhanced petroleum geology understanding

Background

Innovate Licence P2478 was awarded in September 2019 to Corallian Energy (Operator, 45%); Upland Resources (40%); and Baron (15%). The Licence's current phase modest work commitment is to undertake reprocessing of legacy 2D and 3D seismic data and perform other studies in order to reduce risk and refine volumetric estimates ahead of making a "drill or drop" decision before the end of Phase A of the licence in July 2023.

Covering blocks 12/27c, 17/5, 18/1 and 18/2 in the Inner Moray Firth area of the North Sea, the Licence contains the prospective Dunrobin area which consists of large shallow rotated fault blocks which are mapped mostly on 3D seismic data including candidate direct hydrocarbon indicators. Well costs are expected to be modest at c. £7 million gross as the prospect lies in shallow water of less than 100 metres and the total drilling depth of the well is prognosed to be approximately 660 metres.

Dunrobin is evaluated by Baron to be one of the few remaining targets yet to be drilled in the UK North Sea with estimated gross mean prospective resources of the order of 100 MMbbl (a non-SPE PRMS compliant estimate).

In Q1 2021, the joint venture partners received the results of technical studies from a large European E&P company under a work sharing agreement, which enhanced the partners' understanding of the petroleum geology and corroborated their view of Dunrobin as a potentially attractive and substantial target.

Farm In Agreement

In order to build on work already undertaken on the Licence and to accelerate progress, existing partners Corallian and Upland have signed an agreement whereby Baron will increase its interest in the Licence from 15% to 32% in exchange for paying 100% of the costs of the remaining Phase A work commitments up to a cap of £160,000 (the "Agreement"). Under the terms of the Agreement all other costs, including, inter alia, licence and OGA fees and the Operator's administrative expenses, will be borne by all of the partners proportionate to their revised interests. Corallian will remain the Licence's Operator with Baron assuming the role of technical overseer of the remaining Phase A work commitments. No consideration is payable to Corallian or Upland under the Agreement.

Commencement of the outstanding Phase A technical work commitments is due shortly with the key component, that of 3D seismic reprocessing, expected to be delivered early in 2022. The Board believes that this will provide the partners sufficient time to mature the Dunrobin Prospect and to engage with potential drilling partners in due course.    

On completion of the Agreement, the revised interests held in the Licence will be as follows:

• Corallian 36%;
• Upland 32%; and
• Baron 32%.

The Agreement is subject to the consent of the OGA.

Jon Ford, Technical Director of Baron commented:
"This Agreement, in keeping with our corporate strategy, more than doubles Baron's interest in the prospective Dunrobin area at a modest cost, whilst at the same time accelerating the subsurface evaluation towards a decision regarding the potential drilling of an exploration well evaluated to have a sizeable resource target. The 3D seismic reprocessing is aimed at reducing the range of volumetric uncertainty and subsurface risk, as well as providing drilling location candidates, during 2022."