The stock value of United Oil & Gas PLC (AIM: UOG) experienced a significant drop, exceeding 25%, in the early hours of trading on Wednesday. This decline came in the wake of the company’s announcement that it had decided to cancel a previously agreed upon deal to sell an oil exploration license in the North Sea.
This morning, the shares hit a low of 0.75p, a stark contrast to the closing price of 1.02p per share the previous day. However, there was a slight recovery to 0.90p per share at the time of this report.
In a statement released today, United Oil & Gas disclosed that the conditional sale agreement of the UK Central North Sea Licence P2519, which encompasses a section of the Moray Firth Basin and the ‘Maria’ plot in the Forties Sandstone region, to Quattro Energy Ltd has been called off.
The company had previously announced in early October that the deadline for fulfilling the conditions of the asset purchase agreement had been extended to 27 October 2023.
In today’s statement, United Oil & Gas confirmed that while regulatory approval for the license transfer had been obtained, Quattro Energy failed to meet the funding requirements stipulated in the purchase agreement, and no further extension was granted.
The oil firm pointed out that Quattro Energy was “incapable of securing the necessary funds to finalize the deal,” amidst a challenging environment marked by regulatory and fiscal uncertainties, which has shaken investor confidence in the UK North Sea developments.
The current phase of the license is set to expire on 30 November of this year. To extend the license beyond this date, a firm commitment to drill a new well in the next phase is required.
United Oil & Gas has decided not to pursue the next phase of the license, stating that all other potential avenues to progress this opportunity have been explored. The company noted that the capital invested in the Maria discovery to date amounts to approximately US$1 million.
Brian Larkin, the Chief Executive of United Oil, commented on the situation, stating: “Over the past few years, we have successfully liquidated our stakes in licenses in both the North Sea and Italy, channelling the proceeds into our ventures in Jamaica, the North Sea, and corporate G&A. We had deemed our stake in the Maria license as non-essential to our future plans, leading us to initiate a farmout process, culminating in the sale agreement with Quattro announced in January of this year.”
He further added that the company’s expenditures over the past year on the Maria license have been minimal, limited to license costs, which have been effectively offset by the $100k non-refundable deposit received in September.
