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Europa wants Irish farm-out to accelerate exploration

Speaking with Proactive Investors, Europa chief Hugh Mackay explained that if the right deal can be agreed, with the right partner, there’s a real possibility that the next phase of exploration could get underway this year.
Europa wants Irish farm-out to accelerate exploration

Impressive, albeit early stage, resource estimates for one of Europa Oil & Gas’s (LON:EOG) Irish prospects sent shares higher today.

Following ‘first pass’ seismic mapping of the Kiernan prospect the company, which is currently worth just £16mln, says there could be as much as 1.6bln barrels of oil in three reservoirs.

The AIM quoted share shot up over 15% in early deals, before settling to trade at 11.88p – up 5.6% on the day.

Kiernan is one of two prospects the company has identified within the acreage it has under licence options in the South Porcupine basin, off Ireland’s west coast. The other, Mullen, is estimated to contain a shade under 500mln barrels of oil.

Europa is now looking to bring in a partner to help bring the projects forward, starting with a 3D seismic programme and followed by drilling.

Speaking with Proactive Investors, Europa chief Hugh Mackay explained that if the right deal can be agreed, with the right partner, there’s a real possibility that the seismic programme could get underway this year.

He says that acquiring 3D seismic is going to be the key step in de-risking Kiernan to the point where it becomes a ‘drillable’ prospect.  And getting a partner to commit to funding this work will be central to any farm-out deal.

“There are two things we want [from a farm out], first we want to get the new seismic shot and if that stands up we want to get a well drilled.

“And our preference it to try and accelerate that process as much as we can.”

Those following the development of Ireland’s growing offshore oil industry will know that industry interest has stepped up significantly over the past eighteen months.

This is, in part, down to Providence Resources’s (LON:PVR) success in the Celtic Sea where it has confirmed the Barryroe project as Ireland’s first commercial oilfield.

And in the coming months the drilling of the Exxon-operated Dunquin well – which also involves Providence as well as European majors ENI and Repsol – is expected to switch attentions to the South Porcupine basin.

A success at Dunquin would be significant, not just for those partners but also to the broader Irish oil and gas sector and the South Porcupine basin specifically.

A breakthrough in this high profile well could bring greater recognition, an improved proposition for industry investment and potentially lead to an influx of significant new players into the region.

So, Europa’s farm-out process comes at an opportune time - particularly as its two know prospects are located on either side of Dunqiun.

That said, Mackay is quick to point out that geologically Europa’s prospects are very different to the kind of play Dunquin is targeting - so from a technical point of view the result will neither validate nor invalidate Europa’s plans.

“While we would welcome it [a Dunquin success] as it would deliver a very nice ‘halo effect’, we would caution against too much irrational exuberance.

“And on the other hand if [Dunquin] fails it won’t have written off the whole basin either, because [Dunqiun] is special and quite unique prospect.”

Europa’s data room is set to open for interested parties later this month.

In addition to Kiernan and Mullen, Europa also believes the area covered by the licence options also have potential in other areas which warrant further investigation.

Meanwhile, the company also plans to continue to develop the other assets in its portfolio, particulatly in the UK and France. However, Mackay explained that Europa may focus more on Ireland when it looks to add new projects in the future.

“This is an exciting time for Europa, as we look to advance our balanced portfolio of assets, which also includes onshore UK production and exploration as well as a large onshore France gas appraisal project, and in the process build substantial value for all our shareholders,” he said in this morning’s stock exchange statement.

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