The majority owner of the Horse Hill oil field in Surrey has announced an extension to the initial farm-in agreement with the Texas-focused PennPetro Energy.

UK Oil & Gas plc (UKOG), which currently holds 85.635% of the Horse Hill licences, reached agreement with PennPetro in March 2023.

PennPetro is headed by David Lenigas, a former chairman of UKOG.

In a statement to investors today, UKOG said the conditional binding Horse Hill farm-in term sheet would be extended until 30 June 2024.

Under the deal, PennPetro would pay all the costs of a 12km2 3D seismic survey and a new production well (Horse Hill-3). In return, it would get 49% of any oil production revenue from the well.

The agreement still needs to be approved by the industry regulator, the North Sea Transition Authority, and finalised between UKOG and PennPetro.

UKOG would retain its ownership and rights under the deal to all the oil extraction and revenues from the current producing well, Horse Hill-1 well. UKOG’s subsidiary, Horse Hill Developments Limited, would remain the field and licence operator. UKOG would have a 43.67% net effective interest in Horse Hill-3.

Shares in UK dropped 4% today to 0.024p.