Europa Oil And Gas has announced a farm-in agreement with a subsidiary of the independent oil and gas exploration and production company Kosmos Energy Ltd for its two Licencing Options LO 11/7 and LO 11/8 in the South Porcupine Basin offshore Ireland.
Under the terms of the agreement, Kosmos will:
* acquire an 85% interest and be appointed as operator of both Licences
* fully fund the costs of a 3D seismic programme on each Licence
* pay 85% of costs incurred by Europa to date
Contingent upon an election of the companies to enter into a subsequent exploration drilling phase on one or both of the blocks, Kosmos will also incur 100 percent of the costs of the first exploration well on each block. The first exploration wells on LO 11/7 and LO 11/8 have investment caps of US$90 million and US$110 million respectively. Costs in excess of the investment cap would be shared between Kosmos (85%) and Europa (15%).
As set out in the Company’s technical update announcement dated 16 January 2013 in respect of these Licences, Europa commenced the farm-out process with the objective of finding a partner with the technical and financial resources and the strategic intent to pioneer a new hydrocarbon play in a deepwater frontier basin. The transaction with Kosmos represents the successful conclusion of this process.
The completion of the farm-in agreement remains subject to Irish governmental approval. Further announcements will be made as and when necessary.
Europa’s CEO Hugh Mackay said: “We are very pleased to have secured a respected leading independent such as Kosmos as a farm-in partner and operator for our Irish Licences. Kosmos are a highly experienced operator in frontier basins and pioneered the Cretaceous stratigraphic play that has resulted in significant exploration success in the Atlantic margin basins. We look forward to working with Kosmos and their involvement is a highly significant first step towards realising the potential value of our exciting prospects in a new hydrocarbon play located in an essentially undrilled basin offshore Ireland.
“The farm-in provides recognition of the substantial potential value lying in our Irish exploration prospects. The work programme associated with the farm-in has the potential to deliver significant value realisation. Europa’s retained 15% interest exposes the Company to substantial upside in the event of drilling success at either or both of these prospects at a much reduced risk and cost to
“We understand that the Eirik Raude rig is in Irish waters to drill Exxon’s Dunquin well. An exciting new chapter in the exploration of Ireland is starting and we are delighted to be part of it.”
About LO 11/7 and LO 11/8, offshore Ireland
LO 11/7 and LO 11/8 each cover an area of approximately 1,000km2 in the highly prospective South Porcupine basin, offshore Ireland. The Licences have been mapped using existing 2D seismic data and are undrilled. Europa’s technical work to date has identified two, previously unknown, prospects in the Lower Cretaceous stratigraphic play: Mullen in LO 11/7 and Kiernan in LO 11/8.