Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG / Sector: Oil & Gas
2 March 2015
Europa Oil & Gas (Holdings) plc (`Europa' or `the Company')
Shareholder Newsletter
Europa Oil & Gas (Holdings) plc, the AIM quoted oil and gas exploration and
development company with a combination of producing and exploration assets in
Europe, is pleased to announce that a newsletter detailing ongoing and upcoming
activity across its portfolio of projects onshore UK, onshore France and
offshore Ireland has today been sent to subscribers and can be found at the
following link on the Company website:
http://www.europaoil.com/documents/2015investorletter020315FINAL.pdf
The text of the newsletter, which does not contain any price sensitive
information, is repeated below:
Dear Investor
The first two months of 2015 have already brought several items of high impact
newsflow across our three areas of focus: onshore UK; onshore France; and
offshore Ireland.
Wressle
Onshore UK, testing operations at the Wressle exploration discovery well in
PEDL180 in the established East Midlands Petroleum Province commenced in
January 2015 and remain ongoing. The well was spudded in August 2014 and in
September we announced that we had discovered hydrocarbons in three levels. The
testing operation is allowing us to evaluate hydrocarbon type through the
recovery of oil, pressure data and other information that will enable us to
better understand hydrocarbon phase, reservoir quality and reservoir
performance.
The result of test 1 in the Ashover Grit was announced on 9 February and
reported free flowing oil production rates equivalent to 80 barrels of oil per
day (`bopd'), along with 47 thousand cubic feet (`mcf') of gas per day. The
results of test 2 in the Wingfield Flags were announced on 19 February and
reported free flowing oil production rates equivalent to up to 182 bopd, along
with 456 mcf of gas per day. Test 3 in the Penistone Flags is ongoing. Clearly
this is a very promising start to operations and the data recovered is being
analysed to enable an extended well test (`EWT').
EWT operations typically involve production of hydrocarbons for a period of
weeks or months with the purpose of obtaining more detailed and insightful
information about reservoir performance. This information will be used to
design the optimum Field Development Plan (`FDP'). Europa and its partners will
apply to the Department of Energy and Climate Change (`DECC') for approval of
the EWT. When approving the EWT, DECC will specify the volume of hydrocarbons
that we are allowed to produce. Any oil produced by the EWT will be sold.
DECC approval of the FDP is also required before long term production
operations can take place. It is currently anticipated that EWT operations,
compilation of the FDP together with obtaining all relevant permissions and
permits for a development will take place during 2015. Exact timing of the EWT
will depend on the outcome of a reservoir engineering review which will define
the completion strategy and the surface package of equipment required. Europa
has a very strong reservoir engineering capability and we will put these
abilities to full use in evaluating the Wressle test results.
Kiln Lane
Operations for the Kiln Lane exploration well in the adjacent PEDL181 have
proceeded according to plan and the well was spudded on 23 February 2015. Kiln
Lane is a conventional oil prospect with gross mean un-risked prospective
resources of 2.9 mmbo. In the event that we discover oil then operations will
follow a similar schedule to that at Wressle: after wireline logging
operations, the well will be suspended and the drilling rig demobilised, we
will return with a dedicated test rig to undertake production testing
operations. Assuming exploration success, the timing of testing will depend on
the nature of hydrocarbons found which will inform detailed test design and
specification of equipment. Should production testing have a successful outcome
then we will follow up with an EWT and in parallel with this begin compilation
of a FDP and other permitting requirements for a development.
It is currently expected that these activities would take place during 2015 and
that any oil produced by the Kiln Lane EWT would be sold. Exploration success
at Kiln Lane would be a playmaker and there are a number of conventional oil
exploration leads elsewhere on the licence area that would be derisked and will
be further evaluated.
Holmwood
The planning inquiry for the Holmwood well in PEDL143 will be conducted in two
parts with the first for the original application site taking place in April
2015. As a consequence of changes to the regulatory regime we have had to apply
for planning permission for the underground deviated well path. In the event
that planning permission for the deviated well path is refused the planning
inspector will hear the evidence in the second part of the planning enquiry and
make one decision for both the surface site and deviated underground well path.
We are preparing very thoroughly for the inquiry. Following the inquiry it is
expected that the planning inspector's decision should be announced in H2 2015.
A successful outcome would result in drilling the Holmwood exploration well,
with 2016/17 being the most realistic timing for this activity. The
Infrastructure Act 2015 has recently become law and will facilitate subsurface
access issues.
14th Onshore UK Licensing Round
Europa has bid in the 14th onshore UK licensing round and we anticipate that
the results will become known in H1 2015. We understand that the round has been
competitive with some 95 applications submitted and we hope that this high
level of interest will result in a step up in exploration activity onshore UK
over the next few years.
Current Production
Our onshore production remains an important source of revenue for the Company.
As we have previously communicated, our existing fields are in long term
decline and the best way for us to increase production is through the
exploration drill bit. We have got off to a good start with the Wressle
discovery and the Kiln Lane well offers another opportunity to find oil. We
continue to undertake initiatives to reduce operating costs at our fields and
to minimise downtime. Obviously it is disappointing that the WF9 producing well
has had to be shut in, however, at only 8 bopd, its contribution to our total
production was small. Rest assured that converting Wressle and Kiln Lane into
revenue generating production will be a priority should the EWT results be
positive.
France
In France we announced on 16 February that we have farmed out the Tarbes Val
d'Adour permit to Vermilion Energy. As should be expected, Europa does not
provide the market with a running commentary on progress of any of our farm-out
activity and will only make announcements once a farm-out document has been
signed. In this instance the Heads of Terms were signed in July 2014 and the
intervening period was spent completing the detail of the farm-out. Under the
terms of the farm-out, Vermilion will be assigned operatorship and an 80%
interest in the Tarbes permit and will carry Europa for a €4.65 million work
programme. Once the carry is fulfilled Europa will pay its 20% equity share of
any subsequent expenditure. Vermilion is the leading operator in onshore France
and is the ideal partner for our operations. The farm-out is subject to
obtaining government approval for the assignment of equity and operatorship and
for an extension to the term of the permit. The process for both of these
required approvals began in H2 2014 and will take a number of months to
complete. We hope to obtain the approvals at some point during 2015. The Berenx
farm-out process is on-going and announcements will be made when there is
something substantive to report.
Ireland
The jewel in our crown is our Irish Atlantic offshore portfolio. Considerable
progress was made in 2014 and it is expected that a drilling decision will be
made during H1 2015. Following farm-out to Kosmos in April 2013 we converted to
Frontier Exploration Licences (`FEL') in July 2013 and between July and October
Kosmos acquired a 5,028 km2 3D seismic survey, the biggest ever in Ireland.
Processed data became available in April 2014 and in early December 2014 Kosmos
delivered the prospect inventory. Across our two licences FEL 2/13 and FEL 3/13
our new prospect inventory shows combined gross mean un-risked prospective
resources of 1.5 billion barrels of oil (resources by definition are
recoverable). Prospects Beckett and Wilde in FEL 3/13 have gross mean
prospective resources of 760 mmbo and 493 mmbo respectively and in FEL 2/13 the
Doyle A and Doyle B prospects have gross mean prospective resources of 123 mmbo
and 69 mmbo.
The new prospect inventory is based on state of the art 3D seismic which made
full use of all the latest technical developments in acquiring, imaging and
interpreting data in deepwater environments. The old prospect inventory was
based on a sparse grid of historic 2D seismic of various vintages and data
quality. In these circumstances it is not unheard of for prospects to disappear
completely once infill seismic is acquired. This is clearly not the case with
our licences in Ireland: the new seismic has confirmed the presence of
prospects, with much greater confidence than before and the prospective
resources are very large. This is a significant and positive development.
Technical work is currently being conducted on prospect risking and ranking, in
particular using special seismic analysis to identify direct hydrocarbon
indicators, flat spots, conformance and AVO anomalies. These are desktop
studies and do not require more seismic acquisition. It is currently expected
that this work will be completed in H1 2015 and will enable a drill decision to
be made. If a decision is made to drill in summer 2016, then substantial work
will be conducted during 2015 to make the operation drill-ready. The Irish
Atlantic Margin licensing round closes in September 2015 and we will be
participating in it.
Competent Persons Report
Europa will complete and issue a Competent Persons Report during H1 2015. This
will be issued in two parts. Part 1 on the Irish portfolio will be issued first
and part 2 updating our UK and French portfolios will follow and will include
results of Wressle testing and Kiln Lane drilling.
Outlook
Oil is a cyclical industry and after three years of stable prices in excess of
US$100 a barrel we are currently in a downturn. Three years ago the combined
value of the 100+ oil and gas companies on AIM was almost £20 billion, today it
is just over £4 billion. Clearly these are difficult times for all oil
companies, however, these circumstances do help crystallise action and create
opportunities. As well as prudently managing our revenue and our cash we
continue to evaluate consolidation opportunities and will not hesitate to act
where we can identify value for Europa shareholders.
Finally I would like to bid farewell to our outgoing Chairman Bill Adamson and
welcome Colin Bousfield as our new Chairman. Bill was responsible for
recruiting me into Europa and he has provided sound advice to the Board over a
number of challenging issues. We wish him well in his future endeavours. Colin
is a proven deal maker and we hope to make full use of these talents.
2015 has started well, with positive results from Wressle testing, commencement
of drilling at Kiln Lane and the farm out of Tarbes to Vermillion. The
management and board at Europa are committed to maximising value for
shareholders and we will continue to execute our plans to progress our licences
and expand our portfolio during the remainder of 2015. I am sure that when I
write to you again I will be reporting further success.
Yours sincerely
Hugh Mackay
CEO
* * ENDS * *
For further information please visit www.europaoil.com or contact:
Hugh Mackay Europa + 44 (0) 20 7224 3770
Phil Greenhalgh Europa + 44 (0) 20 7224 3770
Matt Goode finnCap Ltd +44 (0) 20 7220 0500
Simon Hicks finnCap Ltd +44 (0) 20 7220 0500
Frank Buhagiar St Brides Partners Ltd +44 (0) 20 7236 1177
Lottie Brocklehurst St Brides Partners Ltd +44 (0) 20 7236 1177
Notes
Europa Oil & Gas (Holdings) plc has a diversified portfolio of multi-stage
hydrocarbon assets that includes production, exploration and development
interests, in countries that are politically stable, have transparent licensing
processes, and offer attractive terms. The Company produced 165 boepd in the UK
during the 2013/2014 financial year, generating sufficient revenues to cover
corporate overheads and some exploration expenditure. Its highly prospective
exploration projects include the Wressle (recently drilled and undergoing
testing) and Kiln Lane prospects in the UK; 100% owned gas exploration prospect
(107 bcf) and appraisal project (CPR 277 bcf) in onshore Franc a joint venture
with Vermillion Energy also in onshore France; and a joint venture with leading
independent Kosmos to explore two licences in offshore Ireland with the
potential to host gross mean unrisked prospective resources of 1.5 billion
barrels.
Qualified Person Review
This release has been reviewed by Hugh Mackay, Chief Executive of Europa, who
is a petroleum geologist with 30 years' experience in petroleum exploration and
a member of the Petroleum Exploration Society of Great Britain, American
Association of Petroleum Geologists and Fellow of the Geological Society. Mr
Mackay has consented to the inclusion of the technical information in this
release in the form and context in which it appears.