Tuesday 24 October 2017

Europa Oil to launch farm out in January for Irish licences potentially worth $1.1bn

A worker walks in between oil barrels at Pertamina's storage depot in Jakarta. Reuters
A worker walks in between oil barrels at Pertamina's storage depot in Jakarta. Reuters

Paul O'Donoghue

UK explorer Europa Oil will formally launch a process at the start of January to find project partners for three Irish exploration licences potentially worth €1bn.

Speaking to the Irish Independent, Europa chief executive Hugh Mackay said that the company is starting its farm out process on January 11 after its partner Kosmos Energy Ireland pulled out earlier this year.

Europa is aiming to find a partner by the summer of 2016. The company has just had three prospects on one of its exploration licences in the Porcupine basin off the west coast of Ireland independently valued at $1.1bn.

The study was carried ouy by UK firm ERC Equipoise. It estimated that the non-risked net present value of the licence is potentially $7bn.

However, this valuation would only be realised in optimal circumstances, which are unlikely to occur. The mean, risked net present value was put at $1.1bn (€1bn).

Europa currently holds a 15pc stake in the licence after its partner Kosmos Energy Ireland, which had held 85pc, pulled out of a joint venture between the two companies earlier this year.

The venture comprised of two licences in the Porcupine Basin. Kosmos had estimated that it could have spent $200m on drilling at the licences.

Europa will take back 100pc ownership of the licence as long as it receives government approval.

Europa is currently on the hunt for partners with Mr Mackay saying: "Our licences are drill-ready. If a company had the desire and we managed to land a farm out by summer of next year then there is the possibility that you could drill by summer of 2017, it takes about a year to organise a deep water well. Our plan is to open the data room on January 11."

Data rooms are used by companies to securely allow prospective partners to view sensitive information.

Mr Mackay also said that drilling costs have come down significantly over the last year.

"The rig costs have dropped in half, whereas before it would cost $600,000 a day for a rig now it's $300,000.

"Spread costs have also dropped from say about $400,000 to about $300,000 a day," he said.

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