Australia-based junior Spark Exploration is launching a farm-out process as it looks to bring in a partner to help explore and potentially develop its licences in the emerging West of Shetland fractured basement play.

Spark has engaged the London office of BMO Capital Markets to act as advisers, the company confirmed to Upstream.

Invitations are being sent to interested parties this month, with a physical data room due to open in the UK capital at the end of August.

The deadline for offers is expected to be November.

The Perth-based company said it has also brought on board Jim Mair, the former head of upstream mergers and acquisitions at Shell and an ex-director at Aberdeen-based Dana Petroleum, to "ensure it gets the best possible result from the process".

Spark managing director Matt Szwedzicki told Upstream: “We will not be too prescriptive about the deal structure - we are open to a range of different structures or deals so long as they deliver value to Spark’s shareholders.”

Spark picked up two West of Shetland licences in the UK’s 30th Offshore Licensing Round.

Licences P2407 and P2412 straddle the Rona Ridge geological feature, adjacent to acreage where UK-listed Hurricane Energy, which has spearheaded efforts to explore and develop the fractured basement play, recently kicked off output at the Lancaster field using an early production system centred on the Aoka Mizu floating production, storage and offloading vessel.

Spark holds 100% in its licences, bounded by Hurricane’s discoveries in the south and BP’s giant Clair field in the north. The permits contain a mix of fractured basement, Devonian and Cretaceous targets with an aggregate volume of about 2.1 billion barrels of mean recoverable resources.

Szwedzicki said: “It is such a pivotal time in the West of Shetland with the world-class scale of the fractured basement play gaining growing recognition.

"Reserve replacement ratios are key drivers for the global supermajors and there are very few places where opportunities are of a scale to make an immediate impact.

"The list is quite short, Guyana, Brazil and now West of Shetland. The points of difference for West of Shetland are the established and stable regulatory regime, the depth of industry and support service experience and the very competitive fiscal terms.”

Spark first unveiled its plans at the Prospex 2018 conference in London late last year and says it has since been approached by a number of E&P companies.

The principal basement prospect is Bader, named after British World War 2 fighter pilot Douglas Bader, in keeping with Hurricane's policy of naming its discoveries in the area after World War 2 planes.

Bader has been independently assessed by consultancy RPS as potentially holding between 676 million and 1.28 billion barrels of mean recoverable prospective resources, with the different scenarios dependent on whether or not it is found to be independent or connected to Halifax.

Szwedzicki said Spark has strong support from its shareholder base, which includes a number of specialist resource backers. Sydney-based Macquarie Bank is a “cornerstone investor”, and is assisting with the evaluation of development solutions and financing options.

Spark said it has ability to progress at 100% if needed.

Szwedzicki said preliminary indications show that capital markets have a strong appetite for funding Spark to a much bigger scale, “however, we believe the time is right to explore value outcomes through an industry engagement process”.

Spark is fully funded for its initial two-year work programme, which involves a commitment to reprocess 3D seismic data and carry out geological and geophysical studies.

It has a drill-or-drop decision to make by September 2020.

Spark has licensed TGS 3D and long offset 2D seismic covering over 100 kilometres of the Rona Ridge, which Szwedzicki said offers the “best quality” data across its licences.

Hurricane Energy’s shares last week recorded their biggest daily rise since 2017, jumping more than 13% after the group upped its production guidance for 2020 on positive results.

“From 2020, target production guidance envelope is increased from 17,000 barrels per day, which remains the base case, to an upper target of 20,000 bpd,” Hurricane said in a statement.

However, this came after Hurricane and partner Spirit Energy said they would plug and abandon the Warwick Deep well — the first in a planned three-well campaign — after it failed to flow at commercial rates.

Spirit agreed last September a farm-in deal with Hurricane to explore the company's Greater Warwick Area.

Spirit is committing an initial $180.6 million to drill three wells in two licences in return for a 50% interest.

Further payments, taking the total up to $380 million, will follow if any finds are made and development work goes ahead.

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Spark ignites farm-out hunt for partner off UK