LONDON (ShareCast) - IGas has confirmed it is in talks to buy Caithness Oil, a subsidiary of British independent oil and gas company Caithness Petroleum.

The company has entered into a Heads of Agreement (HOA) with Caithness Petroleum to potentially acquire its arm for £8.95m to be paid through the placement of more than 7.7m IGas shares.

Under the terms of the HOA, IGas will acquire 100% interests in Caithness licences in the northern coast of Inner Moray Firth, including the Lybster field.

The Lybster Field was discovered in 1996 by Premier Oil at well 11/24-1 which tested 36 American Petroleum Institute (API) oil at over 2,000 barrels of oil per day (bopd) from the Beatrice Formation.

The field was put into production in May 2012 and, prior to being temporarily shut-in for a routine workover, was producing 200bopd gross and in excess of 2m standard cubic feet per day (mscf/d)of associated gas.

The oil is currently transported and sold to facilities at Nigg.

The proposed acquisition is subject to approval by the Department of Energy and Climate Change and shareholders.

"I am pleased we have managed to secure this opportunity to increase our existing production and one that offers significant upside potential,” said Chief Executive Officer, Andrew Austin.

“The transaction is in line with our strategy to grow our production base in order to fund our exploration activities and to take advantage of accretive acquisition opportunities. IGas continues its strategy of delivering secure hydrocarbons for Britain."

RD

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