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Europa’s Mackay says there’s never been a better time to drill Irish wells

Published: 12:18 16 Jun 2015 BST

Tullow_rig_pic,_workers
"Rig rates will probably never be lower.”

There has never been a better time to drill exploration well off Ireland’s west coast, according to Europa Oil & Gas (LON:EOG) boss Hugh Mackay.

The explorer has an estimated US$1.6bn worth of prospects in the Atlantic margin, and it is partnered with Kosmos Energy; which is currently mulling its future drilling plans.

Prior to crude oil’s decline deep-water rig rates were benchmarked at around US$600,000 per day, but now according to Mackay those rates have in some cases halved.

Mackay, in an interview with Proactive Investors, highlighted anecdotal industry reports that a well in a ‘harsh’ deep-water environment, such as Ireland’s Atlantic margin could be drilled for around US$60mln.

At that price it would be well within the cap outlined in Europa’s partnership with Kosmos, which committed to covering all costs up to US$100mln for the first well.

“There has never been a better time for drilling exploration wells than right now,” Mackay said.

“If you have the money, now is the best time. Rig rates will probably never be lower.”

Cheaper drilling is just one reason for the apparent optimism.

Europa today revealed an independent report which valued its 15% share of three exploration prospects at US$1.6bn. The ERC Equipoise study follows a competent person's report which suggested Europa’s acreage could be host to 1.49bn barrels.

These exploration prospects have been matured though the use of cutting edge 3D seismic technology, which is something that until recently had never been used offshore Ireland.

This is the modern technological standard required by most of the larger oil and gas firms, and the more detailed imagery and analysis is providing much more insight to the potentially very large targets in the Porcupine basin.

Super-explorer Kosmos is understood to be planning to bring a new partner to the exploration venture via farm-out in order to share some of the costs and risks. It is anticipated that this process will advance later in the year, and a decision regarding drill plans would follow thereafter.

Europa’s third-party assessment is the latest in a number of impressive, albeit ‘blue-sky’ estimates in the region.

In recent week’s Providence Resources (LON:PVR), which alongside ExxonMobil drilled unsuccessfully in the basin back in 2013,  told the market it had identified new systems and targets in the area using 3D.

Several other explorers including Cairn (LON:CNE) are also among those now exploring the basin.

Increasing industry interest is expected to see a competitive upcoming oil and gas licensing process in Ireland.

The Irish authorities are due to close the books on its latest auctioning process in September. Up to 256,700 square kilometres of prospective areas will be subsequently handed out to oil companies.

Compared to other regions exploration offshore Ireland remains in its infancy.

The market will in the coming months be looking to see whether lower costs and the promise of big targets can boost sentiment and inspire new investment.

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