Investors gave a cautious welcome to the news that North Sea oil play Trap Oil (TRAP:AIM) had agreed a farm-in deal into the Trent East Area – the shares ticking up 1.8% to 13.88p.
The update reflects a likely ramp up in drilling activity for the £32 million cap which has been hampered by a lack of available rigs since listing on AIM in March 2011. The resulting delays have seen the shares fall in value by more than two thirds on the 43p issue price.
The Trent East Area, in which Trap is taking a 33.33% stake, contains the existing Trent East discovery. The company, which plans to take the lead on the development of the asset subject to Department of Energy & Climate Change approval, estimates this could contain 60 billion cubic feet of natural gas. Under the terms of the farm-in it is committed to secure a drilling rig to appraise the find within six months.
The group can fund any drilling through the $20 million lending facility agreed with GE Energy Financial Services at the end of January (30 Jan). At the time broker N+1 Singer described this facility as 'a sensible step for Trap with stable cashflow now being received.'
Trap also announced operations on the Scotney exploration well would begin in the short-term, after bad weather held things up, and drilling on the Magnolia prospect is expected to commence before the end of this month. More disappointing was the news that the Crazy Horse exploration target is now unlikely to be drilled until next year.