Australian firm sells Welsh shale gas exploration licence for £10m


Perth-based Eden Energy announces sale of entire UK portfolio to UK firm Shale Energy PLC

An Australian company has agreed to sell the shale gas and coal seam methane exploration licences it holds in Wales as well as parts of England for £10m.

Perth-based Eden Energy announced to the Australian Stock Exchange that its entire UK portfolio would be sold to unlisted UK public company Shale Energy PLC.

If completed, the sale increases the prospects that full-scale fracking operations will soon begin at sites in Wales. The controversial extraction technique involves detonating explosives deep underground to release gas locked in rock.

Eden Energy shares licences to explore about 1,000sq km in Wales, stretching from Swansea to Llantwit Major, with Bridgend-based Coastal Oil and Gas Ltd.

The conditional heads of terms deal is worth £10.061m. The deal consists of a cash payment of £750,000 and £6m in shares of Shale Energy, which is planning to list on the AIM market of the London Stock Exchange.

The £3.25m balance will be payable in two equal tranches of £1.62m on the independently verified best estimate of recoverable gas of 500 billion cubic feet (bcf) and secondly when the estimate reaches one trillion cubic feet (tcf).

The sale comprises Eden’s 50% joint venture interests in 17 Petroleum and Development Licences (PEDLs) in Wales and England and its 100% stake in a further three PEDLs in Wales.

In June 2011, Eden Energy commissioned US consultants RPS Group to investigate the potential shale gas reserves in the numurian measures of about 800sq km beneath Wales.

RPS Group found the region could hold 34 trillion cubic feet of gas, of which 12.8 trillion cubic feet is classified as recoverable.

If the estimates prove correct, the amount is equivalent to four years of the UK’s gas consumption. In 2009, the UK used a total of 3.6 trillion cubic feet of gas.

The estimated coal seam gas in Eden Energy’s 10 PEDLS in South Wales is 980 billion cubic feet of gas.

Coastal Oil and Gas Ltd director Gerwyn Williams said he had no plans to sell his share of the licences.

Mr Williams said his firm would continue to be the operators of the licences, with the company awaiting the outcome of five planning applications to test drill across Bridgend, Vale of Glamorgan and Rhondda Cynon Taf.

Mr Williams said he hoped to test drill in the autumn, possibly at Llandow Industrial Estate. If successful, further planning permission would be needed to commercially extract the gas reserves.

“We are not selling our part, it just means the other 50% will have a different owner,” he said.

“I am not in this for short-term money, I am here to make this work. I want to make it work for everyone.

“I cannot tell you anything about the new owner, we are not party to that, but they will have to be approved by DECC (Department of Energy & Climate Change).”

South Wales Central’s Conservative AM Andrew RT Davies, who is opposed to shale gas exploration in the Vale of Glamorgan, said any doubt over the ownership of the licences must be resolved quickly.

“This is a large sum of money by anyone’s standards, especially given there are no proven reserves. I believe this is the market responding to the demand for shale gas in other parts of the world, particularly North America,” the Welsh Conservatives leader said.

The stock exchange announcement says Shale Energy was incorporated to pursue shale gas opportunities and has been examining possible projects in the USA for the past few years.

The heads of terms, the statement by Eden Energy’s executive chairman Greg Solomon adds, is conditional upon a number of matters, including Shale Energy completing a further capital raising of £5m as a pre-introduction to listing on the stock exchange.

The purchasing entity will be Shale Acquisition Ltd, a wholly-owned subsidiary of Shale Energy.

According to documents lodged with Companies House, Shale Energy was incorporated on March 20 this year and its registered address is a London law firm.

The papers were lodged by Sean Blackwell, who is a director of five companies, which include Shale Gas Poland Ltd and Shale Gas Europe Ltd.

Attempts to contact another director, Kevin Newman, of East Sussex, were unsuccessful.

Posted on: May 30, 2013