Irish oil and gas exploration company Providence Resources has signed a farm-in agreement for the Frontier Exploration Licence 2/14 offshore Ireland with Cairn Energy.
The FEL 2/14 drilling project lies in 2,250-meter water depth in the southern Porcupine Basin and is located some 220 kilometers off the southwest coast of Ireland.
Providence said on Wednesday that the deal was agreed with Capricorn, a subsidiary of Cairn Energy, with an effective date of July 1, 2016.
According to terms of the deal, Capricorn will take a 30 percent working interest in FEL 2/14 and will pay 45 percent of the drilling costs for the 53/6-A exploration well, subject to a gross well cap of $42 million.
Also, Providence will receive a cash payment of $2.82 million, which is equal to 30 percent of the total sunk costs of $9.4 million incurred through June 30, 2016, by the company and its license partner Sosina. The cash payment will be paid on a pro rata basis.
As a result of this transaction, Providence will remain the operator with a 56 percent interest, Capricorn will have 30 percent and Sosina 14 percent interest.
The closing of the farm-in is subject to the approval of the Minister of Communications, Climate Action, and Environment.
Providence has already planned the drilling of the 53/6-A well for June 2017, subject to all regulatory consents, and has contracted the Stena IceMAX drillship to target the Druid and Drombeg prospects.
The drilling contract for the drillship provides for one firm well, plus an additional option for the drilling of a second follow-on well. The operational rate agreed for the rig is $185,000 per day.
If the partners agree to drill a subsequent appraisal well in the license, Capricorn will pay 40 percent of the appraisal well costs and will have the right to take over operatorship of the license.
Tony O’Reilly, Chief Executive of Providence, said: “We are extremely pleased to have agreed on this farm-in transaction with a world class partner such as Cairn, who have recently enjoyed considerable success with their Atlantic deep-water exploration program offshore Senegal. This license has attracted considerable interest, and we continue to discuss possible further equity divestment with other material industry players.
“With the Stena IceMAX drillship already contracted, the partners are currently carrying out a pre-drill well site survey as well as finalizing all other key service contracts, together with requisite permitting and regulatory approvals, for the planned drilling operations in June.”
In related news, Cairn’s Capricorn also farmed into Europa Oil & Gas’ Licensing Option 16/19 offshore Ireland.