Europa Oil relinquishes South Porcupine licensing option

UK, Ireland and Morocco focused exploration, development and production company Europa Oil & Gas has chosen to relinquish its interest in licensing option 16/19 in the South Porcupine Basin, offshore Ireland, it announced on Wednesday.

The AIM-traded firm said the decision came after the completion of the agreed work programme, including a full technical assessment, which found that the prospectivity of LO 16/19 was limited.

Delivery of all reporting requirements and the relinquishment of LO 16/19 was confirmed by the Petroleum Affairs Division of the Republic of Ireland’s Department of Communications, Climate Action & Environment (PAD) on 3 February.

The company said the relinquishment had “negligible impact” on the value of its portfolio.

It explained that, after farming out a 70% interest in LO 16/19 to a subsidiary of Cairn Energy in March 2017, Europa retained a 30% interest in the licensing option.

As part of the terms of the farm-out, Cairn funded a seismic acquisition programme which was completed in 2018.

As a result, Europa’s accounting carrying cost for LO 16/19 was limited to £94,000, which would be written off in the current period.

The company said it estimated that relinquishment would result in the avoidance of full year costs of £0.11m, based on it assuming 100% ownership and converting the LO into a frontier exploration licence (FEL).

Following the relinquishment of LO 16/19, Europa’s licence position in offshore Ireland comprised five wholly-owned licences.

Multiple targets had been identified on seismic data across the licences, and combined, they had the potential to host gross mean unrisked prospective resources of 5.7 billion barrels of oil equivalent, in addition to the 1.5 trillion cubic feet of gas assigned to Europa’s flagship Inishkea prospect on FEL 4/19 in the Slyne Basin.

Inishkea, which is close to the one trillion cubic feet-producing Corrib gas field and associated infrastructure, had an estimated geological chance of success of one in three and was viewed by the company as “infrastructure-led” exploration.

“Today’s relinquishment of LO 16/19 provides a worked example of how our low cost, low risk exploration model works in practice - acquire acreage at an early stage; identify and work up the technical case of leads, attract partners to fund further de-risking of prospectivity and, based on the results, elect to drill or drop,” said interim chief executive officer Simon Oddie.

“In LO 16/19’s case, the decision has been taken by both partners to relinquish the acreage.

“As this demonstrates, our exploration model is centred on potentially exposing Europa to high reward wells while at the same time minimising cost and risk.”

That, Oddie said, was what the company was looking to achieve at its flagship 1.5 trillion cubic feet Inishkea prospect in the Slyne Basin.

“Farming out Inishkea and our other FELs 1/17 and 3/13 is just one workstream being advanced not just in Ireland but across our asset base in onshore UK and offshore Morocco.

“In the UK, we are working with our partners to bring the Wressle field into production later this year at an initial gross rate of 500 bopd and in the process more than double Europa’s net production to over 200 bopd, while offshore Morocco a programme is underway to de-risk targets already identified on our recently acquired acreage.”

The firm was also seeking to add a third area to its portfolio in the appraisal and development part of the business, Oddie said.

“With all this activity in mind, I look forward to providing further updates on our progress.”