UK: Enquest Buys Further into Kraken

UK: Enquest Buys Further into Kraken

 

EnQuest PLC (‘EnQuest’) today announces that it has agreed with Nautical Petroleum plc (‘Nautical’) to acquire a 25% interest in the Kraken oil discovery, together with interests in surrounding exploration acreage. This agreement, by which EnQuest will also become the operator of the proposed development of Kraken, is subject to the normal regulatory and partner consents.

EnQuest will pay Nautical between $150 million and $240 million, by way of a development carry arrangement in relation to Nautical’s remaining interest in Kraken. EnQuest’s cash payments will be deferred and EnQuest will be entitled to receive the capital tax allowances normally available for investment in such a development project. EnQuest will acquire a 25% interest in blocks 9/2b and 9/2c, including the Kraken discovery, for which Nautical estimates a gross contingent resource of 160 MMboe.

The amount payable by EnQuest is dependent on a future determination of the gross 2P reserves in Kraken, which will take place sometime after the start of the Field Development Plan drilling phase. If the determination is less than 100 MMboe, EnQuest will only pay $150 million, by way of development carry. If the determination is less than 166 MMboe, but more than 100 MMboe, then the amount of the development carry will be increased by up to a further $90 million, calculated on a linear pro-rata basis. EnQuest will pay the maximum of $240 million if the future determination of gross 2P reserves is greater than 166 MMboe.

EnQuest will also acquire surrounding exploration acreage, with a 15% interest in blocks 3/22a and 3/26 and a 10% interest in blocks 9/6a and 9/7b. The transaction further provides EnQuest with the option to earn a 45% farm-in interest in block 9/1a, in return for paying up to 90% of the gross cost of drilling up to two wells to appraise the Ketos discovery. EnQuest’s liability to carry Nautical’s costs for the first well is capped at 45% of $15 million gross well cost and, for the second well which is contingent on the success of the first well, capped at 45% of $20 million gross well cost. Ketos has the potential to be tied back to the Kraken field.

Amjad Bseisu, Chief Executive of EnQuest, said:

“EnQuest is very pleased to be able to increase its interest in Kraken and to become the future operator of the proposed development. Based on the operator’s estimates, this 25% interest in Kraken provides 40 MMboe of contingent resources, which when combined with the 32 MMboe of contingent resources from the 20% interest that EnQuest acquired earlier this month from Canamens, adds almost 70% to EnQuest’s end 2010 contingent resources. The purchase cost per contingent barrel is $6/bbl before tax effects and approximately $2.40/bbl post tax effects. This latest transaction also gives us further potential upside from the surrounding exploration opportunities and an agreed farm-in to the Ketos discovery which we will jointly appraise with Nautical.

With EnQuest’s integrated project development capabilities, our execution team will take the project forward and lead the development, subject to approval of the Field Development Plan. With Nautical’s background and deep expertise in this project, EnQuest is keen to combine forces and to jointly move forward what we believe to be one of the most exciting development projects in the UK North Sea.”

Offshore Energy Today Staff, January 24, 2012; Image: Nautical Petroleum

 

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