A North Sea minnow saw its shares double in value yesterday after striking a £2.6million deal to sell a majority stake in its largest undeveloped oil discovery.
Shares in Alternative Investment Market-listed Orcadian jumped from 3.5p to 7p after it announced a deal with an unnamed partner.
The deal, if finalised, would focus on developing the Pilot field, one of the largest untapped areas in the Central North Sea.
The operator would take over 81.25% of the project and become its new manager.
The agreement is not completed and depends on several conditions, including due diligence and regulatory approvals.
Both companies have until 30 November to formally agree the terms.
If the deal goes through, Orcadian will keep an 18.75% stake in the project and the operator will cover all costs until the first oil is produced.
After that, the AIM-listed group will contribute its share of the expenses.
If everything goes as planned, Orcadian could receive up to US$200,000 initially and an additional US$3 million upon project approval.
Pilot, discovered by Fina Petroleum in 1989, is about 100 miles east of Aberdeen. It is Orcadian’s core asset. The field is currently estimated to hold 78.8 million barrels of proven and probable reserves of oil.
Steve Brown, Orcadian’s CEO, said: “We are delighted to have reached this agreement, which sets out a potential pathway to production for the Company’s Pilot field.
“The Pilot field has a substantial proven reserve base with material upside potential in the surrounding area. We are delighted this transaction could enable Orcadian to retain a significant interest in the project and to enjoy the long-term benefits of producing oil for the UK.
“Developing energy in our own backyard contributes to the UK’s Energy Security and balance of payments; delivers long-term high-quality jobs; and minimises emissions associated with satisfying the UK’s need for energy.
“We look forward to progressing the next stages of this proposed transaction and providing further updates.”