Europa Oil & Gas provides operational update regarding Frontier Exploration Licence (“FEL”) 2/14
Friday, Jul 14, 2017
Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Oil and Gas Exploration Company (the “Company”), today provides an operational update regarding Frontier Exploration Licence (“FEL”) 2/14 located in the southern Porcupine Basin. FEL 2/14 is operated by Providence Resources plc (56%) on behalf of its partners Capricorn Ireland Limited (a wholly owned subsidiary of Cairn Energy PLC, 30%) and Sosina Exploration Limited (14%), collectively referred to as the “JV Partners”. The licence contains the Paleocene “Druid”, Lower Cretaceous “Drombeg” and pre-Cretaceous “Diablo” prospects.

The JV Partners have contracted the Stena “IceMAX” deep-water drillship to drill the 53/6-A well in FEL 2/14 to evaluate the vertically stacked Paleocene Druid and Lower Cretaceous Drombeg exploration prospects. Following consent from the Minister of Communications, Climate Action and Environment on July 11, 2017, Providence can confirm that drilling operations on the 53/6-A well programme have commenced.

A further operational update will be provided once the Paleocene Druid prospect has been penetrated or as appropriate. Drilling is then planned to continue to the underlying Lower Cretaceous Drombeg prospect.

53/6-A (Druid & Drombeg) Drilling Campaign

OVERVIEW


Providence Resources P.l.c. (“Providence”) is drilling the Druid & Drombeg exploration well (“53/6-A exploration well”) in Frontier Exploration Licence (“FEL”) 2/14. FEL 2/14 is located in the southern Porcupine Basin, some c. 220 kilometres off the south west coast of Ireland.

FEL 2/14 is operated by Providence (56%) on behalf of its partners Capricorn Ireland Limited (“Capricorn”, a wholly owned subsidiary of Cairn Energy PLC, 30%) and Sosina Exploration Limited (“Sosina”, 14%). FEL 2/14 contains the Paleocene “Druid”, Lower Cretaceous “Drombeg” and Jurassic “Diablo” exploration prospects.

Drilling operations are expected to take 45-60 days in which both the Druid exploration target (prospective resources of 3.180 billion barrels of oil) and the Drombeg exploration target (prospective resources of 1.915 billion barrels of oil) will be drilled by a single vertical well.

OPERATIONS

Drilling operations are being carried out by the Stena IceMAX (“IceMAX”) drill-ship. The IceMAX was specifically contracted by Providence at a rate of $185,000 per day to drill the 53/6-A exploration well. Built in 2012, the IceMAX is a modern harsh environment dual derrick drill-ship designed to operate in water depths of up to c. 3 km. With a displacement of c. 97,000 DWT, the IceMAX has accommodation for 180 persons, has advanced DP 3 station keeping capabilities and has 2 x BOP’s on board. The IceMAX has a drill depth rating of 10,000 metres.

The 53/6-A exploration well is being drilled in 2.25 km water depth with the first exploration target (Druid) situated c. 1.70 km beneath the seabed. The second exploration target (Drombeg) is situated c. 1.00 km under the Druid exploration target. The objective of the 53/6-A exploration drilling programme is to drill a safe well and to discover commercial hydrocarbons in the two defined exploration targets.

In addition to the Stena rig contract, Providence is using other leading industry players to provide operational, logistical and support services for this drilling programme – main contractors include Schlumberger, Lloyds Register/Senergy, CHC Helicopters, Baker Hughes, Weatherford, Petrofac, Ridge, Abel Engineering, Franks International, Met Office Meteogroup, Petersons, Oceaneering, Tenaris, Dril-Quip, Chris Dykes International, Rilta, Sabre Safety and various shipping & shipping related companies including Sinbad Marine, Braemer, Esvagt AS, Ostensjo Rederi, Skansi Offshore and DOF.

The operations are managed by Providence from their Dublin headquarters with a logistical base in Cork and support services provided from Aberdeen and Houston. In all, over five hundred people are involved in the 53/6-A exploration well programme.

COMMERCIAL

In March 2017, Providence & Sosina agreed a deal with Capricorn taking a 30% equity stake in FEL 2/14, subject to the payment of 45% of the costs of 53/6-A exploration well up to a gross well cost of $42 million (“Farm-in”). Capricorn also agreed that, in the event that an appraisal well is drilled, it will pay 40% of the costs of an appraisal well. Capricorn also paid Providence & Sosina US$ 2.82 million in sunk costs (on a 80/20 pro rata basis). Following the receipt of government consent for the Farm-in, the equity ownership in FEL 2/14 is now Providence (56%), Capricorn (30%) and Sosina (14%).

In June 2017, Providence agreed a deal giving TOTAL the exclusive right, but not the obligation, to take a 35% working interest in FEL 2/14, by way of a farm-in which can only be declared after the completion of the 53/6-A exploration well (the “Option”). In consideration, TOTAL is paying Providence & Sosina (on a 80/20 pro rata basis) US$ 27 million in 2 instalments, of which US$ 20.25 million was paid on June 20, 2017 with the balance of US$ 6.75 million payable 3 days after the issuance of the P&A notice for the 53/6-A exploration well.

In the event that TOTAL exercises the Option, Providence, Sosina and TOTAL will execute an agreed form Farm-in Agreement whereby TOTAL will assume a 35% working interest and Operatorship in FEL 2/14. On that basis, the revised equity ownership in FEL 2/14 would be TOTAL (35%), Capricorn (30%), Providence (28%) and Sosina (7%).

As a result of the Capricorn Farm-in, and the cash proceeds from the TOTAL Option, Providence & Sosina have no cost exposure to the drilling of the 53/6-A well up to a gross well cost cap of $42 million.

For more information, please visit:  http://www.providenceresources.com

For additional information on this project, please visit our ProjectsOGP database
Find out more about European Oil and Gas from NewsBase