FAR Ltd. (“FAR”) completed negotiations on joint venture agreements with Ophir Energy PLC (“Ophir”) on highly prospective offshore Kenya exploration permit Block L9.
Block L9 is a large permit in the heart of the Lamu basin. A series of 2D and 3D seismic surveys have identified several oil and gas prospects and leads. FAR has assessed numerous leads each with the potential to contain prospective resource volumes in excess of 300 Mmb/o (unrisked best estimate, 100% basis). FAR has already received a considerable number of unsolicited expressions of interest in Block L9 and will immediately embark on a process to farm out a portion of its 30% participating interest.Following Government approval of the Block L9 joint venture agreements, FAR will pay for its participating interest of past costs (about US$11 million) principally relating to the two large 3D seismic surveys acquired on the permit. FAR expects to recoup a significant portion of these past costs through farming down its participating interest.
Cathy Norman, managing director of FAR said, “The successful execution of these Joint Venture agreements is a further important milestone in FAR unlocking the significant value of its excellent acreage position in the fast emerging Kenyan offshore arena. Ophir provides extensive operational expertise to our Joint Venture and we hope to be drilling our first exploration well on this block in late 2014. Success on this well would likely have a profound impact on the value of FAR.”
FAR has recently received cash proceeds of about US $2.66 million from the sale of its non-core Beibu Gulf asset in China. On September 4, 2013, FAR had a cash position of about $24.57 million. FAR expects to receive a further $5 million from Cairn Energy next quarter in relation to its Senegal farm out deal.
Block L9 was originally awarded in May 2011 with Dominion Petroleum Kenya Ltd. (a wholly owned subsidiary of Ophir) the nominated operator on the permit. Since then FAR and Ophir have been negotiating the terms of Joint Venture arrangements for FAR to obtain a 30% participating interest.
Block L9 contains well developed large carbonate Miocene reef structures that are perceived to be oil prone. There are turbidite sands at several levels over most of the permit with potential for both structural and stratigraphic plays. The eastern part of the block is on trend with the Mbawa-1 gas discovery where several large structural leads have been identified. Good quality Tertiary and Cretaceous marine clastic reservoirs are likely to be present and sealing shales are widespread. The Block L9 Joint Venture anticipates drilling its first exploration well in late 2014.