Egdon Resources becomes UK's second biggest shale gas player with Alkane Energy deal

LONDON: Oil and gas explorer Egdon Resources announced a takeover offer for Alkane Energy's shale gas assets that would make it Britain's second-largest shale gas company. The enlarged Egdon Resources would hold around 9 trillion cubic feet (tcf) of unconventional gas and 140,000 acres of shale gas land. That would put it second only to IGas, which last week announced its acquisition of rival Dart Energy , gaining access to more than 1 million acres of shale.

"It clearly strengthens our position. We now have a far more substantial acreage holding in what is our core area of interest in the Gainsborough Trough," Egdon Managing Director Mark Abbott told Reuters.

The shale gas industry is preparing for summer's onshore oil and gas licensing round, Britain's first in six years, which should test oil majors' appetite in the nascent British shale gas market. Egdon said on Tuesday it had signed a conditional purchase agreement for Alkane's onshore shale gas assets in exchange for 40 million new ordinary shares, giving Alkane a 21.55 per cent stake in Egdon.

Egdon will also raise up to 7 million pounds to finance further shale gas exploration work on its new sites by placing 32 million new ordinary shares at 20 pence, a 7 per cent discount to Monday's closing price. Another 3 million shares will be offered to qualifying shareholders at the same price. "(This agreement) will enable us to benefit from the potential upside from the development of shale gas in the UK whilst we remain focused on growing our core business," said Alkane Chief Executive Neil O'Brien in a statement.

Alkane, an AIM-listed company which specialises in extracting conventional gas for electricity generation, will also have the right to nominate O'Brien to the Egdon board, provided his company maintains a minimum 10 percent stake in the explorer. The deal, which is subject to approval by the boards and the government, will leave Egdon with an estimated 28 trillion cubic feet of gas initially in place, roughly 10 years' worth of Britain's annual gas consumption. The additional assets nearly double Egdon's total shale gas acreage in Britain. Shares in Egdon were trading 9.2 percent higher at 23.65 pence at 1310 BST.