UKOG increases stake in Horse Hill oil field to 86%

UK Oil & Gas (UKOG) has agreed to acquire the entire share capital of Tellurian Investments’ subsidiary Magellan Petroleum for £12m in cash and shares.

Magellan holds a 35% direct interest in the Horse Hill oil field and surrounding highly prospective PEDL137 and PEDL246 licences, UKOG’s flagship asset.

The acquisition will allow the company to gain full control over the forward Horse Hill drilling programme and production schedule, along with full ownership of the Horse Hill oil field site lease.

As an outcome of this transaction, drilling of the HH-2/2z Portland horizontal well will follow the completion of the share purchase agreement (SPA).

Under the agreement, UKOG will make an initial payment of £8m (£5m in cash and £3m in UKOG shares) upon share purchase agreement completion.

It is expected to pay a £3m deferred payment on or before 31 December and £1m second deferred payment before 31 March next year, in UKOG shares.

Commenting on the transaction, UKOG chief executive officer Stephen Sanderson said: “This transformational acquisition, the largest in UKOG’s six-year history as an oil and gas company, boosts UKOG’s net share of its flagship Horse Hill asset by a significant 69% from a 50.635% to an 85.635% net interest, providing the company with the lion’s share of future production revenues and reserves, together with absolute control over the field’s future development and progress.

“The funding of UKOG’s increased 85.635% share of the new HH-2/2z horizontal drilling and testing campaign, scheduled to commence later this year following transaction completion, will not be impacted by this acquisition, as existing cash funds were set aside and ringfenced for this purpose in spring 2019.”