Australia’s Talon in another North Sea acquisition

Australia-based Talon Petroleum has entered into a binding heads of agreement for the purchase of 100% of the shares in EnCounter Oil, which owns two UK North Sea licenses. 

EnCounter is a private, UK-based company formed in 2012 by key former members of the executive management team of EnCore Oil.

EnCore was a London-listed, North Sea focused E&P company which was formed in 2005. EnCore was involved in 25 wells and was responsible for significant hydrocarbon discoveries at Breagh, Cladhan, Catcher, Varadero and Burgman as well as several other smaller discoveries. EnCore was acquired by Premier Oil in 2011 for £221 million.

Announcing the transaction on Thursday, Talon said that the completion is subject to final legal and financial due diligence on EnCounter and all required shareholder approvals.

The EnCounter acquisition is the second transaction executed by Talon, as the company looks license to build on its newly incorporated UK North Sea strategy. Namely, Talon last October entered into an agreement with Corallian Energy to earn a 10% interest in License P2396.

The license is located in the prolific Central Graben area of the UK North Sea and contains the Curlew‐A discovery made by Shell in 1977. Curlew‐A contains an independently certified gross 2C Contingent Resource of 45mmboe. Appraisal drilling at Curlew‐A is currently scheduled for 3Q 2019

Talon stated that the EnCounter transaction provides the company with a 100% ownership of two recently awarded, high-impact exploration licenses which are being readied for farm-out.

Further, the acquisition provides Talon with access to a technical database. In addition, the UK North Sea executives Graham Doré and Paul Young will join the Talon team.

Dore will join the board of Talon Petroleum as a Non-Executive Director upon completion of the acquisition. Current Non-Executive Chairman, Peter Love has advised that he will be retiring from the board at that time.

Talon Managing Director, Matthew Worner, said: “The transaction with EnCounter Oil is a significant step forward in Talon’s UK North Sea strategy. Talon is extremely pleased to be executing this deal with EnCounter Oil, with the company acquiring both the highly-prospective Skymoos and Rocket prospects.”

Worner added: “The company set about its strategy to assemble a compelling portfolio of UK North Sea opportunities only six months ago. To have brought in three exciting and highly prospective assets in such a relatively short period of time is a particularly pleasing outcome, and Talon will continue to build on this during the year.

“A farm-out process to secure industry funding for drilling both Skymoos and Rocket will now commence, and we look forward to drilling an appraisal well at Curlew-A which is currently planned for 3Q 2019.”

Subject to final legal and financial due diligence on EnCounter, Talon shareholder approval, and regulatory approvals, Talon will acquire 100% of the issued share capital of EnCounter for a 100m ordinary Talon shares, subject to a 12-month voluntary escrow period; a 150m Performance Shares converting to ordinary Talon shares upon the successful farm-out of the Skymoos Prospect, and Talon electing to move into the drilling phase of License 2363 on or before September 30, 2021; and 150m Performance Shares converting to ordinary Talon shares upon the successful farm-out of the Rocket Prospect, and Talon electing to move into the drilling phase of License 2392 on or before September 30, 2021.

Presently, EnCounter is the holder of 100% interest in two exploration licenses in the UK Continental Shelf, License 2363 and License 2392, which contain the Skymoos and Rocket exploration prospects. The addition of these two licenses adds significant exploration upside potential to the Talon portfolio and come with very modest work commitments in the initial phase, Talon explained.

The Rocket Prospect

The Rocket Prospect lies entirely within the Innovate Phase A License P2392, which was awarded to EnCounter during October 2018, as part of the UKCS 30th Seaward Licensing Round. The license is formed by two blocks bordering the greater Catcher Field development area, which was discovered by EnCore prior to its sale to Premier.

Should the Rocket Prospect be successful, the development of the well will be led by a short tieback to this recently commissioned development facility. An estimated probability of commercial success for the Rocket Prospect, after all technical work has been completed, is in the range 20-30%.

The Skymoos Prospect

License P2363 is an Innovate Phase A License which was awarded to EnCounter in October 2018. The license is located in the Outer Moray Firth, west of the Scott and Telford Fields, and north of the recent Equinor Burns Sandstone Verbier Discovery.

An estimated probability of commercial success for the Skymoos Prospect is also in the range 20-30%.

Funding 

In order to provide funding for the progression of Talon’s portfolio of UK North Sea assets and plans for future growth, Talon has agreed a placement to sophisticated investors of 416,666,667 shares at an issue price of $0.003 to raise an amount of $1.25 million.