ConocoPhillips Exercise Option for Stake in 3 Legs' Shale

Shale gas-focused 3Legs Resources has announced today that it will relinquish a 70 per cent stake in its Polish Baltic Basin concessions as US giant ConocoPhillips exercises its call option over the assets. 3Legs will retain a 30 per cent interest in the concessions.

The move will see operatorship of the three Baltic Basin concessions pass to ConocoPhillips and increasing its equity interest in those concessions to 70 per cent. The deal is expected to be completed by September of this year.

The three concessions are the Damnica, Karwia and the Lebork concessions where four shale wells have been drilled, fracked and two tested with funding from ConocoPhillips.

"We are very pleased that ConocoPhillips has exercised its call option in respect of our three western concessions in the Baltic Basin," CEO of 3Legs Peter Clutterbuck said today. "Our objective all along has been to see ConocoPhillips exercise this option and this decision represents a very satisfactory conclusion to almost three years of cooperation in the exploration and appraisal of the Baltic Basin shales...

"We enjoy an excellent working relationship with ConocoPhillips, which will now move into a new phase as operatorship of the three western concessions passes to ConocoPhillips."

3Legs also announced today that it would be forming a new legal entity in Poland to act as a subsidiary of the company to deal with three other eastern concessions. The terms of the contract between this entity and ConocoPhillips would be the same as the the terms set out in the Joint Evaluation Agreement between the two companies.

"We have developed with ConocoPhillips a basis for the separate treatment of the western and eastern Baltic Basin concessions," Mr. Clutterbuck said. "This will enable us, together with ConocoPhillips, to continue to progress the exploration and appraisal of our three western concessions.

"We have already demonstrated that these concessions are more dry gas-prone and hence offer a more attractive risk profile, confirming our original assessment of the basin. Nevertheless, we continue to believe our three eastern concessions also have potential and we will be finalising our plans for these concessions over the coming months, following which a further announcement will be made."

ConocoPhillips will retain the option to acquire a 70 per cent interest in these eastern concessions also, with six months noticed required before the expiration of that option on 30 September 2012.