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Now that Europa Oil & Gas (LON:EOG) owns all of the Frontier Exploration Licence 3/13, offshore Ireland, the value potentially attributable to the company for the asset amounts to US$7bn.
That’s the view of industry expert ERCE Equipoise, which has provided the company with an updated independent assessment of the asset.
It comes a month after Kosmos Energy decided to exit the exploration venture in which it was previously expected to spend up to US$200mln on drilling in return for an 85% stake.
Europa currently retains the entirety of the asset, though it is now seeking new partners.
Today’s updated assessment reflects the prospective value added to the licence as a result of the Kosmos partnership – as the US firm paid for extensive 3D seismic exploration work – and it also helps strengthen Europa’s hand as it negotiates an alternative deal.
It is particularly timely as it comes as chief executive Hugh Mackay heads to Dublin for the Atlantic Ireland conference.
Key industry players, including those that recently applied for new acreage in the September 2015 licensing round, are expected to be at the event.
A data room for those interested is expected to set up by January next year.
Mackay, in a statement today, described the new ERCE report as a “very strong” indication of the commercial potential of the Irish licence.
“To realise this potential we need to drill exploration wells and find oil,” he said.
“Our mission is to land a farm-in partner to share the costs of drilling and the target audience is major and mid-cap oil companies.”
Mackay added that the costs of drilling offshore wells have dropped because of reduced industry activity amid low oil prices.
Specifically, he says, rig costs are now at the lowest level for a decade.
“Whereas a rig used to cost US$600,000 per day, now it is US$300,000.”
Anything that floats is half the price it used to be, he said, and there has never been a better time to drill offshore Ireland.
The Europa boss also highlighted the recent high level of participation in the recent licensing round, which saw applications for 43 new licences – three times more than the preceding round in 2011.
“We are encouraged by the high levels of participation in the 2015 Atlantic Margin Licensing Round, particularly given the low oil price,” Mackay said.
“It would appear that many other companies share our belief in the technical and commercial case for exploration offshore Ireland.
“I look forward to updating the market in due course as we focus on securing a farm-in partner with whom we can work to unlock the potential value of these prospects.”
The ERCE estimate, defined as an un-risked net present value (NPV), comes alongside a risked NPV of US$1.1bn for the company’s working interest in the project. The latter valuation has a number of additional considerations, including the fact that Europa no longer has a ‘carried’ interest in the project.
The valuation is based on an earlier competent person's report which identified a number of prospects within the licence, with resources estimated between 227mln and around 3.3bn barrels.
Shares rose by 17% to 3.95p.