Proactive Investors - The share price of United Oil & Gas PLC (LON:UOGU) plunged by more than a quarter in early trading on Wednesday morning after it said it had terminated an agreement to sell a licence for oil exploration in the North Sea.
Its share price fell to a nadir of 0.75p per share this morning, after closing at 1.02p per share yesterday, before rising back up to 0.90p by the time of writing.
United Oil & Gas said in a statement today that an agreement it had reached for the conditional sale of the UK Central North Sea Licence P2519, including an area of land on the Moray Firth Basin and the 'Maria' plot in the Forties Sandstone region, to Quattro Energy Ltd had been terminated.
The oil company announced in early October that the long stop date for the satisfaction of conditions for the asset purchase agreement had been extended to 27 October 2023.
In the statement this morning, the company said that the regulatory consent for the transfer of the licence had been approved, but that the buyer Quattro Energy had not satisfied the funding conditions under the purchase agreement and that no extension has been agreed.
United Oil said that Quattro had been “unable to raise the funds to complete the transaction”, against a backdrop of regulatory and fiscal challenges that have impacted investor confidence about developments in the UK North Sea.
The current phase of the licence expires on 30 November this year, and a firm commitment to drill a well in the next phase of the licence would be required for it to continue beyond that date, it said.
The oil company confirmed that it had made the decision not to apply to move to the next phase of the licence, having “exhausted all other available avenues to progress this opportunity”, adding that the amount capitalised to date on the Maria discovery was about US$1 million.
United Oil’s chief executive Brian Larkin said: "Over recent years, we have successfully monetised our interests in licences in both the North Sea and in Italy, using the proceeds to fund our activities in Jamaica, the North Sea and also corporate G&A.
“We had identified our interest in the Maria licence as non-core to our future strategy and on that basis undertook a farmout process which resulted in the agreement to sell to Quattro on the terms announced in January this year."
He added that in the past year, "the company has incurred only licence costs in relation to the Maria licence, the cost of which is effectively covered by the $100k non-refundable deposit received in September."