A COMPANY that has said it is at the heart of Britain's shale oil and gas revolution is moving into the North Sea in a multi-million pound deal.
IGas Energy, which has said its licences in North West England could contain massive amounts of shale gas, has agreed to acquire the Caithness Oil business from Caithness Petroleum for shares in the company worth £8.95 million. The deal will give IGas interests in several blocks in the Moray Firth and an onshore licence.
The assets include an interest in the Lybster field, which IGas said was producing 200 barrels of oil per day before it was shut in for maintenance.
Mayfair-based IGas said the deal was in line with its strategy of expanding its production base to support its exploration programme and further acquisitions. The company could use cash generated from production to fund drilling on an onshore portfolio that includes licences in England and Wales.
In July, the AIM-listed company said studies of the shale under its licences in North West England had shown the potential for them to hold 170 trillion cubic feet gas. The company said then it expected drilling scheduled for the fourth quarter would allow it to "further refine" these estimates.
IGas's chief executive Andrew Austin has said shale oil and gas could help the UK reduce its reliance on imports and on coal-fired power generation.
The company has agreed to acquire Caithness Oil subject to the required consents and due diligence.
In a related deal, Trapoil is selling its interests in eight North Sea blocks to Caithness Oil for $7.5m (£4.8m) shares in IGas. The blocks contain the Lybster field and exploration acreage.
AIM-listed Trapoil will record a net impairment charge of around £9.2m, reflecting the £14m aggregate book value of the assets.
Trapoil recorded a loss of £770,000 on its share of Lybster production in the period ended 31 December. It cited higher than anticipated maintenance costs and well downtime.
Mark Groves Gidney, chief executive of Trapoil, said: "In light of Caithness' anticipated exit from the North Sea region ... I am pleased that this transaction will, on completion, provide the company with share consideration to the value of US$7.5 million."
Privately-owned Caithness Petroleum is understood to be happy to leave the North Sea, where companies may have to incur hefty exploration costs before the value of their assets is recognized by the market.
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