Cluff completes North Sea farm-out deal with Shell

Cluff Natural Resources has received the required regulatory consent from the Oil and Gas Authority (OGA) in relation to the farm-out of Licence P2437 to Shell and the farm out has been completed.

Cluff Natural Resources entered into a binding, conditional farm out agreement and a three-month exclusive option with Shell in relation to the company’s Southern North Sea Licenses P2252 and P2437, respectively, back in February 2019.

Shell exercised its option to farm into Licence P2437 at the end of April 2019 with a commitment to drill an exploration well on the Selene prospect “at the soonest possible opportunity.”

Following receipt of OGA approval and signing of the Joint Operating Agreement, Shell has been assigned a 50 percent working interest in License P2437 which contains the Selene prospect, Cluff said in a statement on Tuesday.

The company will now receive the balance of the $600,000 initial consideration (being $300,000) from Shell within 30 days of completion. Cluff retains a 50 percent working interest in Licence P2437 and will act as Licence Administrator until a well investment decision in made.

Shell has indicated its intention to commit to drill an exploration well on the Selene Prospect at the soonest possible opportunity.

Once a well investment decision is made, Shell will pay for 75% of the cost of an exploration well, including testing, subject to an aggregate cap of $25 million.

Licence P2437 is located adjacent to existing Shell-operated infrastructure and contains the Selene Prospect which is estimated to contain a P50 Prospective Resource of 291 BCF (gross).

Commenting, Cluff’s Chief Executive Graham Swindells said: “The UK’s Southern Gas Basin is coming under increased focus currently with several highly material exploration campaigns ongoing around our acreage. As such, we are delighted to have formally completed this farm out agreement with a committed partner such as Shell, to de-risk and ultimately drill the high-impact Selene prospect.”

The Selene prospect

Licence P2437 was awarded to the Cluff in the UK’s 30th Licensing Round and has an effective date of October 1, 2018, with the first term of the licence running for a period of six years.

The prospect is imaged by high quality 3D seismic data and is highly analogous with a number of nearby fields including the Shell-operated Barque gas field.

The license commitments associated with Phase A of the license have been discharged and the company will be working with Shell to ensure that exploration drilling on the license can take place at the soonest possible time.

P2437 contains the Selene prospect which is estimated to contain unaudited mean GIIP of 509 BCF (equivalent to approximately 90 mmboe) in a four-way dip closed structure in the Leman Sandstone. P50 Prospective Resources associated with the Selene Prospect are estimated at 291 BCF (or approximately 50 mmboe).

The Selene prospect is considered low risk with an estimated Chance of Success of 39%.

The prospect is located approximately 20 kilometers from infrastructure associated with the Barque gas field which ultimately feeds the Bacton gas processing plant.

A number of other prospects have also been identified on the block which are covered by existing seismic data and will be evaluated in due course.

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