--adds share price--
Regency Mines (LON:RGM) has signed a heads of agreement to acquire a stake in the Horse Hill development near Gatwick Airport.
The minerals explorer will take a 5% stake in Horse Hill Development (HHDL), the special purpose vehicle set up to develop the UK project; HHDl has a 65% interest in the project and is the operator.
Regency directly will pay £300,000 in total, comprising £50,000 initially and the rest as cash calls are required for well drilling. After full payment, it will own a direct 3.25% of the PEDL 137 licence that includes Horse Hill.
Regency said its investment follows a decision by Alba Mineral Resources (LON:ALBA), in which it has a 14.87% direct stake, to participate in the HHDL project. Alba has a binding agreement in place to acquire a 5% interest in HHDL on the same terms.
A first well is expected to spud during July 2014 and is targeting a number of conventional stacked oil and gas targets up to a depth of 8,512 feet.
Andrew Bell, Regency’s chairman said:"The opportunity to invest with Alba, Angus Energy, and the other investors in this exciting UK oil and gas project follows extensive due diligence and analysis.
"By co-investing with Alba, Regency supports Alba in its strategic re-launch into the oil and gas space, which Regency has been assisting.
"Regency increases its exposure to the potential upside of the project while minimising downside risk and total cost, offering Regency investors access to near-term cash generation and an increase in the liquidity of its existing investment in Alba.
"While a relatively small financial commitment at this stage, the Regency board believes that this strategic shift will help unlock value for Regency amidst challenging market conditions in the mineral resource sector."
Other investors in HHDL as well as Alba include Angus Energy, Solo Oil (LON:SOLO), Doriemus (LON:DOR), Stellar Resources (LON:STG) and UK Oil & Gas Investments (LON:UKOG).
Magellan Petroleum owns the other 35% of the project, which is just a few miles from the Brockham oilfield.
Shares in Alba jumped 128% to 0.628p, while Regency was 11% higher at 0.283p.