Australian oil and gas company FAR Limited will buy 80% interest and operatorship of Erin Energy’s offshore A2 and A5 blocks in The Gambia, which are close to the SNE discovery offshore Senegal.
Erin Energy will retain a 20% working interest in both blocks, the company said on Monday.
Under the terms of the farm-out agreement, which is subject to approval by the Government of the Republic of The Gambia, upon closing of the transaction, FAR will pay Erin Energy a purchase price of $5.18 million and will carry $8 million of the company’s share of costs in a planned exploration well to be drilled in late 2018.
In addition, if Erin Energy’s share of the exploration well is less than $8 million, the balance is to be paid in cash to the company.
Under the agreement, the well can be carried out in either of the two blocks before December 31, 2018, or such later date if the current license periods are extended.
Jean-Michel Malek, Erin Energy’s interim CEO, commented, “This partnership will allow us to keep a significant stake in these highly-prospective blocks with no additional capital investment required through the first exploration well, while also strengthening the balance sheet and allowing us the ability to consider additional growth opportunities. This farm-out highlights our strategy of maximizing our exploration breadth while minimizing exploration risk.”
Close to SNE discovery
According to Erin Energy, Blocks A2 and A5 are adjacent and on trend with the 2014 SNE-1 oil field discovery, which was the industry’s largest offshore oil discovery that year. Cairn Energy is the operator of the SNE field and FAR is a partner with 15% interest. FAR is currently considering arbitration against ConocoPhillips over the sale of its stake in the SNE discovery to Woodside. Namely, the sale was subject to the rights of partners to pre-empt.
Erin noted that, since the drilling of the SNE-1 well, the partners in the field have drilled five appraisal wells on the SNE field and increased the field’s best case 2C contingent recoverable oil resource to 641 million barrels on a 100% basis according to FAR internal estimates.
Earlier today, FAR informed that the VR-1 well appraising the SNE oil discovery, confirmed a 97m gross oil column with greater than expected net pay and thickest net pay of all appraisal wells drilled to date.
In 2017, Erin Energy and FAR plan to undertake reprocessing and interpretation of 3-D seismic data recently acquired by the company to further mature identified prospects on Blocks A2 and A5. The company acquired 1,504 km2 of 3-D seismic data and has identified prospects on the blocks, which are similar to the “shelf edge” play FAR is targeting in its offshore Senegal blocks.
FAR Managing Director, Cath Norman, said: “With eight successful exploration and appraisal wells drilled in Senegal resulting in the FAN and SNE field discoveries, the Mauritania-Senegal-Guinea-Bissau (MSGB) basin has emerged as an exploration ‘hot spot’ attracting the attention of the world’s oil majors. Our large equity position allows us to farm down an interest before drilling.”
The A2 and A5 blocks cover an area of approximately 2,683 km2 (663,000 acres) within the emerging and prolific Mauritania-Senegal-Guinea-Bissau Basin and lie approximately 30km offshore in water depths of 50 to 1,200 meters (164 to 3,900 feet).
Offshore Energy Today Staff