The Press and Journal (Inverness, Highlands, and Islands)
CLNR could lose two licences in North Sea
Oil and gas: Advisers say firm needs to give partner 50% stake
Cluff Natural Resources (CLNR) has been warned it could lose two North Sea licences if it continues to struggle to find a partner for them.
Financial advisors Allenby Capital have produced a report for the firm, saying the stock is “very much a play on securing large-scale financing” for the work.
The two southern North Sea licences in question (P2248 and P2252) are estimated to hold around 2.4 trillion cubic feet of gas.
CLNR has struggled to find a partner to help finance a drilling campaign, and the Oil and Gas Authority (OGA) last month waived the firm’s obligation to farm-out.
Allenby said that project financing remains “the greatest risk” to the firm.
A drill or drop decision is expected in September, by which point CLNR could lose the licences, according to Allenby.
If a partner cannot be found, financing would need to take place in order to raise cash for appraisal of CLNR’s ten recentlyawarded blocks through the OGA’s 30th licensing round, which would “dilute existing shareholders”.
In April CLNR generated £750,000 through share placing ahead of its application to the OGA, and is “fully funded” until the middle of the fourth quarter of 2018.
However Allenby expects the funding requirement to be £2 million for both 2018 and 2019.
The advisors say that, to pay for the two licences at £5-7 million and £12 million each, CLNR would need to give a 50% stake to a partner, citing the model of Hurricane Energy’s deal with Kerogen Capital.
Allenby estimates that with a farm-in partner
“Project financing remains the greatest risk to the firm”
found, drilling would take a minimum of six months to get underway, potentially in Q2 or Q3 of next year.
First production may then be in 2023, assuming further appraisal would be needed on the resource.
The 10 full and partial blocks awarded in the OGA licensing round would require “a lengthy period of appraisal” to determine their potential.
Despite farm out opportunities being “few and far between”, CLNR founder Algy Cluff has previously said that the firm will leave “no stone unturned” to find exploration partners.