UK Oil & Gas plc reported today that it intended to increase its stake in the Horse Hill exploration licences in Surrey.
In a statement to investors, the company said it had a signed a deal to acquire the entire share capital of Magellan Petroleum, a major shareholder in the licences.
Magellan, a subsidiary of of the Houston-based Tellurian Investments LLC, held 35% of the licences, PEDL137 and PEDL246.
The deal will cost UKOG £12m in cash and shares, the statement said, and increase the company’s share from just over 50% to almost 86%.
It gives UKOG full control over a drilling programme at Horse Hill and sole ownership of the Horse Hill site lease, the statement said.
UKOG tweeted that the deal would be concluded “in the next few weeks”. It said a permitted second well at the site would be spudded “in late summer”.
This well, a horizontal into the Portland limestone, had previously been expected in the first half of 2019 and today’s news was treated with some scepticism on social media.
The UKOG share price closed down 5.71% at 0.825p.
Stephen Sanderson, UKOG’s executive chairman, described the acquisition as “transformational” and the largest in the company’s six year history. He said it would provide the company with:
“the lion’s share of future production revenues and reserves, together with absolute control over the field’s future development and progress.”
UKOG said the deal would be financed by cash from a £3.5m placing raised in March 2019 and funds from a £5.5m loan from Riverfort Global Opportunities PCC Limited and YA II PN Ltd. The statement said the full £5.5m from the loan would be paid in cash to UKOG on the completion of the acquisition.
Loan money not used for the acquisition would fund construction of production facilities and other regulatory activities needed to bring the Horse Hill site into long-term production.
The company’s application for production and extra wells at the site is still going through the planning system.