UK-headquartered oil and gas company Quattro Energy Limited has agreed on a long stop date extension for the acquisition of United Oil & Gas’ license in the Central North Sea, which includes an existing hydrocarbon discovery.
Following United Oil & Gas’ decision to sell its UK Central North Sea licence P2519, containing the Maria discovery in the Outer Moray Firth Basin, it entered into a binding asset purchase agreement (APA) with Quattro Energy, which is being acquired by Jesmond Capital Limited to form an enlarged entity to be listed on the TSXV. The original long stop date for the satisfaction of the APA conditions was 16 April 2023.
A delay in the completion of this sale pushed the two players to agree to extend the long stop date until 17 May 2023 to allow additional time for the APA conditions required for completion to be satisfied. The following month, a further extension of the long stop date to 31 July was arranged to provide sufficient time for Quattro to meet the funding requirement.
However, United Oil & Gas revealed at the start of August 2023 that all the conditions under the asset purchase agreement for the conditional sale of its UK Central North Sea Licence P2519 had not been met by the expiry of the long stop date on 31 July 2023. Due to this, a potential further extension was being negotiated.
In an update on 8 August 2023, the company confirmed that following the receipt of a $100,000 non-refundable deposit from Quattro and a rescheduling of the total consideration payments, the two firms agreed on an extension of the long stop date in the APA to 30 September 2023.
In addition, a further extension may be required for all conditions precedent to be met to allow completion of the sale, such as regulatory approvals to enable the transfer of funds to United, and the licence assignment to Quattro, with such extension to be automatically granted on the satisfaction of the Quattro funding condition being met by 30 September 2023.
Whilst there has been no change to the maximum consideration under the APA of £5.7 million (about $7.2 million), following discussions with Quattro and their brokers the companies have agreed that revising the schedule of consideration payments will support the Quattro funding process and significantly increase the executability of the transaction.
The revised consideration payments entail a payment by Quattro to United of a $100,000 non-refundable deposit on 7 August 2023 while £1 million of initial cash payment to United is now included in contingent bonus payments, resulting in £1.45 million, less the non-refundable deposit due on completion ($1.75 million).
Additionally, this revision covers no change to the additional £1 million ($1.27 million) to be paid to United upon approval of an FDP for Block 15/18e and contingent bonus payments of up to £3.25 million – $4.13 million – (previously £2.25 million) upon reaching gross production thresholds from the field of three, four and five million barrels.
While considering this extension and revised payment terms, including the receipt of the non-refundable deposit, United Oil & Gas reviewed other available options to deliver value to shareholders from this licence. Afterwards, the firm concluded that the sale to Quattro remains the best option at this time.
United was awarded the license P2519 in December 2020. The Maria discovery, which is located within this license, includes Blocks 15/18e and 15/19c, covering an area of approximately 225 km2, close to existing infrastructure in the Central North Sea. The license has an independently audited mid-case 2C gross contingent resource estimate of 6.3 mmbbls and 23.3Bcf (10.2 mmboe).
The area encompasses the Marigold and Yeoman discoveries, where significant development activity is taking place and the Piper, MacCulloch, and Claymore oil fields. The Maria discovery within the Upper Palaeocene Forties Sandstone was discovered by Shell/Esso in 1976 while drilling for deeper, Piper-equivalent targets, but at the time was not considered commercially viable.
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