Cluff Natural Resources Plc, the AIM quoted natural resources investing company with a high impact exploration and appraisal portfolio focused on the Southern and Central North Sea gas basin, is pleased to announce its interim results for the six months ended 30 June 2019.
· Completed farm-out of 70% of Licence P2252 (which contains the 309 BCF Pensacola Prospect) to Shell U.K. Ltd (“Shell”). Farm-out includes a full carry through acquisition of new 3D seismic and a contingent well commitment
o Acquisition of 3D seismic over P2252 commenced and completed in August 2019
· Announced farm-out of 50% of Licence P2437 (which contains the 291 BCF Selene Prospect) to Shell, completing post period end in August 2019:
o Consideration of US$600,000 (US$300,000 of which was received in the period and US$300,000 post period end)
o Shell to pay 75% of the costs of the first well, up to US$25 million
o Shell has indicated its intention to commit to drill an exploration well on the Selene Prospect at the earliest opportunity
· Transformational equity fundraise of £15.0 million (gross), fully funding Company to end of 2021 including its share of Pensacola and Selene wells
· Cash position of £14.8 million at 1 July 2019, following receipt of net proceeds of fundraise
· Farm-out process on Licence P2352, containing the Dewar Prospect, commenced in July 2019, with multiple parties already in the data room following expressions of interest
o Estimated resource on oil prospect significantly enhanced – now estimated to contain up to 270 million barrels of oil in place with P50 Prospective Resources of 39.5 million barrels
The past six months have been transformational for the Company with it delivering a number of significant steps towards its goal of becoming one of the leading exploration-focussed companies working in the UK Continental Shelf (UKCS).
During the first half , as planned, the Company farmed out an interest in two key licences to Shell which, as part of the transaction, acquired a 70% working interest in Licence P2252 and will cover the entire cost of a 3D seismic survey in order to decide on the best drilling location for the Pensacola Prospect. In addition, the recently awarded Licence P2437 is now the subject of a 50:50 partnership with Shell which has committed to fund 75% of the cost of drilling the first exploration well on the Selene Prospect.
As a result, active operations have been completed on the Company’s investments for the first time since inception, with a 3D seismic survey acquired in the Southern North Sea to evaluate the Pensacola Prospect. Furthermore, the Company is anticipating drilling activity in 2020 and continues to work with Shell to seek to secure a well investment decision in respect of the Selene Prospect later this year.
In addition to work being carried out on licences P2252 and P2437, the Company has launched the farm-out process for the Dewar Prospect in the Central North Sea which has commenced in a significantly better oil price environment than we have seen for years. A number of parties (including major oil and gas companies) have already expressed an interest in the Dewar Prospect and are currently in the data room. The farm-out process is scheduled to run for the next few months and we look forward to updating the market in due course.
Based on this progress, the Company conducted a very successful equity fundraise of £15 million in June this year which, based on current plans, fully funds the Company until the end of 2021 including its participation in two proposed wells to be operated by Shell.
Of course, funding was not the only uncertainty facing the business, or the industry as a whole going forward, with climate change very much at the forefront of people’s minds.
The UK Government has recently introduced legislation adopting the ‘net zero greenhouse gas emissions by 2050’ target which was published by the independent Committee on Climate Change in April 2019. The Committee on Climate Change report was generally a thorough and thoughtful review of the situation in the UK and clearly states that ‘net zero’ does not mean the end of hydrocarbon production and consumption. In fact, the Climate Change Committee has recognised that hydrocarbon consumption, predominantly natural gas, at levels of approximately 70% of today’s are required beyond 2050. The key difference between the Climate Change Committee and our own view is that instead of becoming increasingly reliant on imports from overseas we should be focussing on national production and consumption of natural gas from the UKCS.
A domestic supply of natural gas is good for jobs, good for tax receipts and the balance of payments, as well as being better for the environment compared with importing gas from as far afield as the Middle East and South America.
With a world-class hydrocarbon province, long term national demand and a leading regulatory regime in the UK, the future is bright for companies such as ours with good exploration prospects and a world-class business partner.
16 September 2019