Farm-out Announcement

RNS Number : 3701B

Lansdowne Oil & Gas plc

20 September 2018

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain. If you have any queries on this, then please contact Steve Boldy, the Chief Executive Officer of the Company (responsible for arranging release of this announcement).

Lansdowne Oil & Gas plc

Barryroe Farm-Out  signed

·   Binding Farm-out Agreement signed with APEC

·   Enhanced Multi-well Drilling Programme of 5 firm Wells and 2 Option wells  

·   Increased  Loan and Carry  Agreement

·   Preparation work to commence immediately, with first drilling anticipated in Q2 2019

20 September 2018

Lansdowne Oil and Gas plc ("Lansdowne" or "the Company") is pleased to announce a commercial update on Standard Exploration Licence ("SEL") 1/11 that contains the Barryroe oil accumulation.

SEL 1/11 is operated by EXOLA DAC ("EXOLA", 80%), a wholly-owned Providence subsidiary, on behalf of its partner Lansdowne Celtic Sea Limited, a wholly owned Lansdowne subsidiary (20%).  The area lies in c. 100 metre water depth in the North Celtic Sea Basin and is located c. 50 km off the south coast of Ireland.

Binding Barryroe Farm-Out with APEC

Further to the RNS announcement of March 28, 2018 regarding the signing of a Farm-Out Agreement ("FOA") with APEC Energy Enterprises Limited ("APEC"), the Company is pleased to now confirm that, following the completion of all required ancillary documentation and the receipt of both governmental consents, EXOLA, Lansdowne and APEC (collectively referred to as the "Barryroe Partners") have signed a revised and binding Farm-Out Agreement ("Updated FOA") which assigns 50% equity in SEL 1/11 to APEC.

Summary of Updated FOA Terms & Conditions

The Updated FOA provides for a full cost-carried firm drilling programme comprising of the drilling and testing of four vertical wells and one horizontal sidetrack (collectively the "Drilling Programme"), plus the optional drilling of two further horizontal wells, together with cash advances to EXOLA for certain agreed project and operational costs totalling $19.5 million. 

As certain operational, financial and commercial terms of the transaction have changed from those previously announced on March 28, 2018, the section below provides the final details of the Updated FOA:

Cash Payments

o  With the signing of the Updated FOA, APEC will now proceed with the payment of $9.0 million to EXOLA for certain agreed front-loaded project related costs

o  A further $10.5 million payment will be made to EXOLA to cover future operational costs, such payment to be made 14 days prior to the commencement of drilling

Drilling Programme

o  The drilling of four vertical wells to allow for the evaluation of the main Basal Wealden reservoir interval

o  The first well to include the drilling of a sidetrack to provide a 200 metre horizontal section in the Basal Wealden

o  Drill stem testing is planned for three of the four vertical wells, as well as the horizontal sidetrack

o  The four vertical wells are located across the geographic extent of the Barryroe structure and are designed to test the full potential of the Basal Wealden

o  Drilling to the underlying Purbeckian and Upper Jurassic section is planned in three of the four wells

o  Planning for the drilling of these wells is already advanced, together with the consenting of the recently contracted Gardline "Ocean Observer" to carry out the well site survey operations during Q4 2018, subject to regulatory approval

o  Rig procurement, based on a Q2 2019 mobilisation for the Drilling Programme is also well advanced, as are contracts with various oil field service providers

o  At the completion of the Drilling Programme, APEC also has an option to drill, test and complete two further horizontal wells to the Basal Wealden reservoir interval ("Option Wells")

Financing

o  APEC is directly responsible for paying 50% of all cost obligations associated with the Drilling Programme, and the Option Wells (if applicable)

o  APEC to finance, by way of a non-recourse loan facility (the "Loan"), the remaining 50% of all cost obligations attributable to EXOLA and Lansdowne in respect of the Drilling Programme, as well as the Option Wells (if applicable)

o  The Loan, drawable against the budget for the Drilling Programme, will incur an annual interest rate of LIBOR +5% and will be repayable from production cashflow from SEL 1/11 with APEC being entitled to 80% of production cashflow from SEL 1/11 until the Loan is repaid in full

o  Following repayment of the Loan, APEC will be entitled to 50% of production cashflow from SEL 1/11 with EXOLA and Lansdowne being entitled to 40% and 10% of production cashflow, respectively

Operations

o  EXOLA will remain as Operator of SEL 1/11 for the execution of the Drilling Programme

o  Following completion of the Drilling Programme, APEC will have the right to become Operator for the development/production phase (subject to Ministerial consent)

Working Interest

o  Following governmental approval for the assignment of equity to APEC,, the revised working interest will be APEC (50%), EXOLA (40%), and Lansdowne (10%), with EXOLA retaining the role of Operator of SEL 1/11 

Commenting on the news, Lansdowne CEO Steve Boldy said:

"The finalization of this binding Farm-Out with APEC is a result of a great deal of hard work over the last few months. The revised, enhanced drilling programme will evaluate fully the potential of Barryroe, without additional upfront costs to Lansdowne and we look forward to this with great excitement".

For further information please contact:

Lansdowne Oil & Gas plc Steve Boldy	[phone]

Cantor Fitzgerald Europe Nominated Adviser and Joint Broker David Porter

[phone]

Nicholas Tulloch                                                                            [phone]

Brandon Hill Capital

Joint Broker

Oliver Stansfield                                                                             [phone]

Qualified Person Review

This release has been reviewed by Stephen Boldy, Chief Executive of Lansdowne, who is a petroleum geologist with 38 years' experience in petroleum exploration and management. Dr Boldy has consented to the inclusion of the technical information in this release in the form and context in which it appears.

Notes to editors:

About Lansdowne

Lansdowne Oil & Gas (LOGP.LN) is a North Celtic Sea focussed, oil and gas exploration and appraisal company quoted on the AIM market and head quartered in Dublin.

Lansdowne holds acreage in the North Celtic Sea Basin.

At 31 December 2017, Lansdowne carried intangible assets of £14.672 million, virtually all of which is attributable to the Company's interest in Barryroe.

For the year ending 31 December 2017 Lansdowne recorded a loss of £347,000, again with virtually all of this being attributable to the Barryroe asset.

For more information on Lansdowne, please refer to www.lansdowneoilandgas.com

About Providence Resources

Providence Resources is an Irish based Oil & Gas Exploration Company with a portfolio of appraisal and exploration assets located offshore Ireland.  Providence's shares are quoted on the AIM in London and the ESM in Dublin. Further information on Providence can be found on www.providenceresources.com

ABOUT APEC

APEC Energy Enterprise Ltd. was established in 2014 as a Hong Kong registered company with headquarters in Beijing. In addition to its original focus on offshore oil & gas services, APEC provides upstream energy acquisition advice and management services in partnership with Chinese oil companies, offshore and onshore service providers, and SOE investment groups. www.apecenergy.com 

ABOUT BARRYROE

ABOUT BARRYROE

Barryroe, located in the North Celtic Sea Basin, off the south coast of Ireland, has had six wells successfully drilled on the structure.  Hydrocarbons have been logged in all six wells, with flow test results from four wells.  Four wells were drilled in the 1970's by Esso with a further appraisal well drilled in 1990 by Marathon Oil.  The sixth well was drilled by Providence & Lansdowne in 2011/12.  The oil is light (43° API) with a wax context of c. 17-20%.  The successfully tested reservoir sands are of Cretaceous Middle and Lower Wealden age located between c. 4,500' TVDSS and 7,550' TVDSS.  The field is covered by both 2D and 3D seismic, the latter which was acquired in 2011.

Following acquisition and interpretation of the new 2011 3D seismic data together with the subsequent drilling and testing of the 48/24-10z Barryroe appraisal well in 2012, Providence retained the services of Netherland Sewell & Associates Inc. (NSAI) to carry out a third party contingent resource audit (CPR) of the in-place hydrocarbon and recoverable resources for the Basal Wealden oil reservoir.  NSAI reported that the Basal Wealden oil reservoir has a 2C in-place gross on-block volume of 761 MMBO with recoverable resources of 266 MMBO and 187 BCF of associated gas, based on a 35% oil recovery factor.  A third party (CPR) audit of the overlying Middle Wealden, which was carried out by RPS Energy (RPS) in 2011, reported a 2C in-place gross on-block volume of 287 MMBO with technically recoverable resources of 45 MMBO and 21 BCF of associated gas, based on a 16% oil recovery factor. 

The total combined audited gross on block 2C recoverable resources at Barryroe therefore amount to 346 MMBOE, comprising 311 MMBO and 207 BCF.   The following table summarises the range of total gross audited on-block Barryroe oil resources:

                                                                                                                               1C                       2C                    3C              

(MMBO)             (MMBO)             (MMBO)

Basal Wealden STOIIP (NSAI)                                                                             338                         761                1,135 

Basal Wealden Recoverable (NSAI)                                                                     85                         266                   511  

Middle Wealden STOIIP (RPS)                                                                              31                         287                   706

Middle Wealden Recoverable (RPS)                                                                      4                           45                   113

TOTAL STOIIP                                                                                                           369                       1,048               1,841

TOTAL RECOVERABLE OIL RESOURCES                                                                  89                           311                 624

Note: The table above excludes recoverable solution gas (i.e. 207 BCF or 34.5 MMBOE in the 2C case) 

Further incremental resource potential has been identified in logged hydrocarbon bearing intervals within stacked Lower Wealden and Purbeckian sandstones which Providence has previously estimated contains total associated P90, P50 & P10 in place oil resources of 456 MMBO, 778 MMBO & 1,165 MMBO respectively. As there is currently limited reservoir and well test data available over these two intervals, future well data over these specific zones would be required in order to firm up their associated final recoverable resource estimates.

 

END

 

 

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