Speaking at last nights Annual General Meeting, Sheepshanks revealed: "We have been talking to Joe about extending his contract for another two years and we are very close now to finalising the deal.
"Joe has done an excellent job in his time here and is one of the best managers in the country. We hope to tie things up over the next few days and look forward to Joe hopefully leading us back to - and in - the Premiership."
Speaking of his prospective new contract personally, former Everton boss Royle said: "It's just a case of a few little formalities to sort out. It was never in doubt that I wanted to stay at this fantastic club."