Frontier Exploration Licence 2/04
SPANISH POINT Gas Condensate and BURREN Oil Prospects (58%)
FEL 2/04 was originally licenced in 2004 and is located in the Northern Porcupine Basin, c. 170 km off the west coast of Ireland. The licence is situated in c. 400 metre water depth and contains the Spanish Point and Burren gas condensate and oil discoveries, respectively.
In 2008, the Company entered into a staged farm-in arrangement with CEPIL in relation to both FEL 2/04 and FEL 4/08, with CEPIL assuming an initial 30% working interest in return for carrying the costs of a 3D seismic programme, which was subsequently acquired in 2009.
In 2011, Senergy completed a Competent Persons Report on the licence which resulted in estimated recoverable contingent resources of 97 MMBOE (2C) for the Spanish Point field. At this point, the partnership moved to the next stage of the licence with a commitment to drill an appraisal well on Spanish Point. Under the CEPIL farm-in agreement, CEPIL’s cost exposure was capped for up to two wells (or well and potential side-track).
In May 2013, CEPIL entered into a farm in agreement with Cairn Energy plc whereby Cairn became operator and agreed to drill an appraisal/exploration well on Spanish Point. As a result, the revised working interests for FEL 2/04 and FEL 4/08 then changed to Cairn
(38.0%), Providence (32.0%), CEPIL (26.0%) and Sosina (4.0%).
In July 2014, the Company announced that the planned Spanish Point appraisal well was delayed due to rig refurbishment issues with the selected rig. In March 2015, drilling was again deferred due to unforeseen changes to the make-up of the joint venture and the
consequent delay to the securing of equipment and other necessary requirements.
In February 2015, the Company announced the acquisition of 100.0% of the issued share capital of CEPIL, effective from November 2014, thereby increasing the Company’s interest to 58.0% in both FEL 2/04 and FEL 4/08, and to 43% in FEL 1/14, for a nominal consideration of US$1 and a contingent payment of US$5 million, payable in the event that a Final Investment Decision (FID) is made for the Spanish Point gas condensate project.
In March 2015, drilling was again deferred due to changes to the makeup of the joint venture and the consequent delay to the securing of equipment and other necessary requirements.
In October 2015, the Company confirmed that it had commenced a farm-out process for part of its interest in FEL 2/04.
As no partner sanction for drilling has been agreed, Cairn has requested (on behalf of the joint venture) an extension to the term of FEL 2/04 (and the alignment of the phasing of FEL 4/08 with that of FEL 2/04) to allow further time for evaluation of the Spanish Point project economics which will, in turn, decide the future course of action on the asset.
Accordingly, the directors took a decision to impair the carrying value of the Spanish Point assets in the year end 2016 accounts.