North Sea E&P company Trapoil (LON:TRAP) has agreed an equity exchange deal with Caithness Oil connected to the Knockinnon and Forse prospects.
The two sides have signed a legally binding agreement that will see Trapoil gain a 35 percent interest in Knockinnon increasing its total working interest to 70 percent. In return, it will transfer its 35 percent equity interest in the Forse prospect to Caithness, which will accept sole responsibility for the firm commitment to the Department of Energy and Climate Change (DECC) to drill a well by 21 December 2013.
At Knockinnon, Caithness will retain a 30 percent interest and each company will pay its participating interest share of all agreed future expenditure. The Knockinnon prospect, discovered in 2000, has estimated most likely recoverable resources of over 6mmbls of oil (Trapoil management?s estimate) and represents a near term development opportunity.
Trapoil will assume operatorship of Knockinnon and will consequently have greater control over the timing of any work programme. There are currently no work commitments to DECC on Knockinnon.
At Forse, Trapoil will be granted the right to acquire a 20 percent working interest for a nominal consideration within three months of the completion of the first well on the prospect. In the event that Caithness does not spud the Forse well by 21 December 2013, Trapoil will be paid US$7 million by Caithness or alternatively will be issued with a 12 month loan note of US$7m secured against all the assets of Caithness.
Any future cash flow from Knockinnon or Forse will not be encumbered by any cost recoveries which have previously arisen or may arise from the existing farm-in arrangements between Caithness and Trapoil.
The outstanding FIA work obligations in respect of Lybster (Licence P.1270, Block 11/24-3v2), will be fulfilled by Caithness in due course with Caithness remaining as operator and Trapoil retaining its existing 35 percent carried interest.
Mark Groves Gidney, the chief executive of Trapoil, said: ?We are pleased to have reached agreement with Caithness on these proposed revised arrangements which provide greater clarity to our ongoing drilling campaign. Upon completion, we will have majority control and operatorship of Knockinnon, which we see as an attractive near term development opportunity.
?Furthermore, Caithness will assume sole responsibility for the costs and liability to DECC associated with the commitment well on Forse, whilst we will retain the flexibility to secure a 20 percent working interest in Forse should the first well prove to be successful.?
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