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Deltic Energy's (LON: DELT) stock price is rising on Thursday following the announcement that it has entered into a binding, conditional farm-out agreement with Cairn Energy through Cairn's wholly-owned subsidiary Nautical Petroleum Limited.
The agreement is centres around five of Deltic's gas licences in the Southern North Sea.
The deal will see Cairn acquire a 60% interest in licences P2428 and P2567 and a 70% interest in licences P2560, P2561, and P2562, located between the Breagh and Tolmount Gas Fields.
If a drilling decision is made either of P2428 and P2567, which contain the most advanced prospects, Cairn will fund 70% of the costs.
Deltic, which changed its name from Cluff Natural Resources in 2020, will retain the remaining interest in the licences. Meanwhile, Cairn will fund 100% of an agreed work programme for each of the five licences. The funding will last up to the point of making a drill or drop decision on each licence.
Once the farm out agreement becomes unconditional, Cairn will pay Deltic $1 million to contribute to historic back costs across the licence areas.
Once the deal is complete, Cairn will become the operator of all five licences.
“This agreement represents the commencement of a wide-ranging partnership with Cairn, whose successful history of opening up new basins is aligned with our exploration-focused strategy. The partnership will result in a significant investment across multiple licences within Deltic's strategic Southern North Sea gas exploration portfolio, as we jointly progress the next high impact drilling targets,” commented Graham Swindells, CEO of Deltic Energy.
Deltic's share price is currently trading 7% above Wednesday's close at 2.14p after initially rising to 2.44p.
Deltic Energy shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are DELT shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies
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