United Oil terminates asset purchase deal with Quattro Energy

United Oil & Gas announced the termination of its asset purchase agreement with Quattro Energy on Wednesday.

The AIM-traded firm said the deal was for the conditional sale of the UK Central North Sea licence P2519, including the Maria discovery in block 15/18.

It said the termination came as Quattro failed to meet the funding conditions outlined in the agreement by the extended long stop date of 27 October, despite receiving regulatory consent for the licence transfer.

The parties agreed on no further extension.

United Oil said the termination came against the backdrop of regulatory and fiscal challenges affecting the UK North Sea region, which it said were casting uncertainty and eroding investor confidence in potential developments within the sector.

Moreover, the current phase of the licence was set to expire on 30 November, and continuing the licence beyond that date would require a firm commitment to drill a well in the upcoming phase.

Recognising the prospectivity of the licence, United Oil & Gas said it had explored all available avenues to advance the opportunity but ultimately decided not to seek entry into the next phase.

As a result, its interest in the licence was expected to conclude on 30 November.

On 30 June, the group had an intangible balance of $1m, representing the capitalisation amount up to that date for the Maria discovery.

“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 general and administrative expenses,” said chief executive officer Brian Larkin.

“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.

“Since signing this agreement with Quattro, we have sought to support their efforts to raise the funds required to complete this transaction and had regular interaction with the Quattro team and their advisors as they progressed their funding process.”

Larkin said it was, therefore, a disappointing outcome for both parties that due to the challenging regulatory and fiscal backdrop in the North Sea, Quattro had been unable to complete its funding process.

“Throughout the last 12 months, the company has incurred only licence costs in relation to the Maria licence, the cost of which is effectively covered by the $0.1m non-refundable deposit received in September.

“Our focus remains on progressing the farmout of Jamaica and the upcoming drilling activities in Egypt including the drilling of the ASD-S-1X exploration well later this year.”

At 1242 GMT, shares in United Oil & Gas were down 10.05% at 0.877p.

Reporting by Josh White for Sharecast.com.