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Lansdowne Oil & Gas still has substantial asset

Published: 14:30 07 Sep 2015 BST

Cairn_India,_on_a_platform
Lansdowne is active in Ireland's Celtic Sea.

It is useless to pretend that the plugging and abandoning some weeks back of the 49/11-3 well on the Midleton field in the Celtic Sea is anything but a great disappointment for Dublin-headquartered Lansdowne Oil & Gas.(LON:LOGP).

The well is close to Kinsale Head, which is Ireland’s only producing gas field.

The oil explorer has a 20% stake in the Midleton concession but once owned 100%. It is some consolation that the operator Kinsale Energy, which farmed-in for 80% of Midleton, fully carried Lansdowne’s share of the drilling costs of 49/11-3.

It is, nevertheless, a blow to Lansdowne at a time when it hoped that a new discovery would re-ignite the company’s share price, which had been becalmed for some time because of a perceived lack of activity.

This operation is very much in line with Lansdowne’s core business model, which is to acquire licences that usually have proven reserves not yet exploited.

It then gets a major company to farm in, because it has the financial muscle and technical wherewithal to develop potentially high impact fields which could then become company-making for a minority shareholder like Lansdowne.

Lansdowne has interests in six other licences in the Celtic Sea, including Helvick where there is a 10% interest, Amerigen with a 100% stake and Barryroe where there is a 20% involvement

Midleton has been estimated to contain 268bn cubic feet of recoverable gas resources, so it seemed like a major prize to go for. The company’s own literature said that a success at Midleton could be worth a multiple of its current market capitalisation which is £4.65mln.

But the fact that the well found non-commercial amounts of gas meant the share price, which had almost doubled to 7.7pence on expectations of good news fell back to 3.13p when the not-so-good- news broke, and today is at a 52 week low of 2.37p.

Speaking to Proactive Investors, Lansdowne chief executive Steve Boldy said at the time: “Yes, the Midleton well result is very disappointing because a successful well could have added a lot of value for shareholders, but we still have substantial resources in the Celtic Sea via our 20% interest in Barryroe”.

A discovery was originally made on Barryroe back in 1973 by Marathon, but nothing was done about it. Providence Resources (LON:PVR), another Dublin–based group that became the operator with an 80% stake in Barryroe, acquired a 3D seismic survey over the field in 2011 before drilling the 48/24 - 10z well, which tested 4,000 barrels of oil equivalent (boepd) in 2012.

Independent reservoir engineers Netherland, Sewell & Associates Inc. (NSAI) has estimated the Basal Wealden zone contains contingent resources of 290mln barrels of oil equivalent (mmboe) while RPS Energy, another independent assessor, put  the figure for the Middle Wealden at 49 mmboe, thus establishing a potentially very substantial resource.

Hats were thrown in the air in delight in Dublin. Providence announced the flow rate because it seemed the venture (JV) partners had made a world class discovery, which would not only reward the companies greatly but also benefit Ireland’s economy. Barryroe is so far Ireland’s only known potentially commercial oil field.

Unfortunately, the excitement surrounding the prospect has faded because Providence has found it difficult to find a farminee to develop the project.

After more than a year of casting around for a farm-in partner Providence confirmed in February that it had, at last, reached agreement on commercial terms with a proposed farminee, but that the closing of the deal was conditional on the would-be partner raising funds.

The Dublin-based company reminded shareholders that there is no certainty that the farm-in will be concluded with the proposed farminee and that this was not an exclusive arrangement.

 The deal still has not been closed and the long delays have weighed heavily on Lansdowne’s share price, effectively leaving the company in neutral. So becalmed did it become, in fact, that in April  Lansdowne announced it was launching a review of its strategic options to maximise value for shareholders.

It said it was undertaking a careful evaluation of its business plan, operational assets, development strategy, market valuation of assets and capital structure.

The options under review could include a corporate transaction, a sale of the business or a farm down or disposal of assets.

Agreeing that the delays have weighed heavily on Lansdowne Boldy said: “These are difficult times to find farm-in partners with the way the oil price is just now, but we believe Barryroe is a very good prospect.

“What should be remembered is that this is shallow water. Studies have shown that the resource at Barryroe can be commercialised with oil prices of between US$30 and US$40 a barrel.”

Meanwhile the strategic review is ongoing. 

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