Paladin currently holds a 58.97436 percent interest in, and operates, the Montrose, Arbroath, Arkwright and Carnoustie Fields ('the Fields'), with ENS holding the remaining 41.02564 percent. These interests will not change as a result of the exchange agreement.
Adjacent to the Fields, Paladin held a 100 percent interest in, and operated, a number of exploration blocks (Blocks 22/17, 22/18, 22/22a and 22/23a non-field areas), including the Wood gas-condensate discovery (a possible satellite development to the Montrose Field), and the four blocks awarded to Paladin in the 21st Licensing Round (Blocks 22/12b, 22/16b, 22/24c and 22/25c).
An exception to this arrangement was that part of Block 22/17 known as the Cayley Exploration Area, to the west of the Montrose Field, in which Paladin held a 28.20513 percent interest and ENS held a 71.79487 percent interest. Under the terms of a pre-existing agreement, ENS had the right to earn a 51 percent interest in the non-field areas referred to above, in return for funding an agreed work program in the Cayley Exploration Area.
Under the exchange agreement, Paladin and ENS have now agreed that their respective interests in all of the exploration acreage should be the same as that in the Fields (Paladin 58.97436 percent and ENS 41.02564 percent). As part of this realignment of interests, ENS will fund the first £5 million of exploration and appraisal expenditure incurred by the joint venture on any of the acreage and Paladin will assume operatorship of the Cayley Exploration Area.
The exchange of interests is subject to the approval of the UK regulatory authorities.
Roy Franklin, Chief Executive of Paladin Resources plc, commented: 'This innovative agreement with a like-minded company paves the way for Paladin and ENS to maximize value in the Montrose/Arbroath area. By aligning our respective interests, we have at a stroke removed both potential conflicts of interest in the use of the existing production facilities and a significant impediment to early exploitation of the acreage around the existing fields.'
Ian Massie, Managing Director of Energy North Sea Limited, said: 'We view alignment of interests as essential to the future success of the Montrose/Arbroath area and are delighted that Paladin as operator share that view. We have been impressed by Paladin's approach since taking over from BP as operator. We look forward to working with them to our and our investors' mutual benefit.'
UK Energy Minister Stephen Timms added: 'I welcome this announcement by Paladin and ENS and see it as further evidence of the great benefits still to be had in the North Sea. I am particularly impressed by the steps taken to align their interests in exploration activity. Commercial moves like these confirm the commitment and innovation of companies like Paladin and ENS to ensure that the potential of our oil and gas reserves is fully realized.'
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