Faroe Petroleum, an oil and gas explorer and producer concentrating on Norway and the UK, has gone into partnership with subsidiaries of Royal Dutch Shell and Spirit Energy on the Edinburgh area ahead of development this year.
Through agreements signed this year, the license partners have agreed to equalise equity in the two UK maritime blocks.
The three firms agreed to take an equal slice of equity on each of the four licence blocks the area covers, giving Faroe 45 per cent, Shell 40 per cent and Spirit 15 per cent.
Faroe said it would operate the licences until a drilling decision was taken, when it would hand over to Shell.
Bosses at Faroe have said the Edinburgh prospect could contain more than 200 million barrels of oil.
The Edinburgh area contains the Edinburgh prospect, which straddles the Norwegian border in the North Sea at the southeastern end of the bountiful Josephine Ridge. It is considered to be one of the largest remaining undrilled structures in the central North Sea, covering an area of over 40 square km.
Founded in 1997, Faroe is being bought out by DNO, already its largest shareholder, for 160p a share, which values the explorer at more than £640 million.
Faroe complained that the takeover undervalued the company.
DNO, which is based in Norway but which mainly produces oil from West Asia, regards the takeover as a means to rebuild its North Sea assets.
The trading of Faroe shares in London is due to be cancelled on February 14 as DNO intends to re-register the explorer as a private limited company.
Graham Stewart, chief executive of Faroe Petroleum, said: “We are pleased to announce the alignment of equity in the Edinburgh area among such a strong partnership, having worked to resolve the commercial impediments in the area for over eight years.“
Stewart is due to resign after the DNO deal is finalised and receive about £12 million in the buyout and in compensation for his share options.
The oil boss said it had taken years to bring the Edinburgh area to the exploration stage and it was an enticing prospect.
“The partnership’s combined operating experience in the UK and Norway represents a distinct advantage in bringing the drilling of this high-impact exploration prospect closer to fruition,” he said. “We look forward to working with the respective UK and Norwegian authorities to progress this exciting cross-border opportunity.”
The Edinburgh area is seen as having extensive reserves. Picture credit: GoodFreePhotos