UKOG Signs HoA to Farm in to Turkish Exploration License
AIM-listed UK Oil & Gas Plc (UKOG) has signed a binding Heads of Agreement (HoA) with U.S.-headquartered Turkish explorer Aladdin Middle East Ltd. (AME) to acquire a 50% non-operated working interest in the Resan license in south-east Turkey. The transaction is UKOG's first foray outside of the UK, as the London-based company has so far focused on onshore exploration and development opportunities in the UK's Weald basin.
Under the terms of the HoA, UKOG will fund 100% of the first of five commitment wells in the license's five-year exploration term and a small 2D seismic survey, capped at US$5 million for the one well plus seismic programme (with an expected gross cost of US$1.0 – 1.5 million). Thereafter, the company will fund its 50% interest share, expected to be approximately US$1.5 million per well. The first commitment well, currently planned to appraise and flow test the Basur oil discovery, will commence drilling before the end of June next year.
The Resan licence covers an area of 305 sq. km in the south-east Anatolian basin, a geological continuation of the prolific Zagros petroleum system, one of the Middle East's major oil-producing areas. The license contains the undeveloped Basur oil discovery and the Resan oil pay opportunity, which according to a June 2020 report commissioned by AME contain aggregate unrisked gross mean oil in place (OIP) of approximately 253 million barrels (MMbbls).
"The quality of the license's geological address and opportunity is compelling, the targets being directly on trend with the geological look-alike East Sadak field and located within the same petroleum system as the major oil-producing Kurdistan region of Iraq," said Stephen Sanderson, UKOG's CEO.
"The Basur and Resan appraisal opportunities compare well with our Loxley and Arreton projects. However, they offer significantly larger upside potential, are much cheaper to drill and can be monetised far more quickly than any of our UK projects. The overall post-tax share of gross revenues is also marginally better than in the UK," he added.
The transaction is subject to customary closing conditions including the the Turkish government's approval, which is expected to take around two months from the submission of the necessary standard documentation. Formal agreements between the parties are expected to be finalized and the documents submitted over the next few weeks.