Independent explorer Kosmos Energy has decided to pull out of its three licenses in the Porcupine Basin, offshore Ireland.
According to partner, Ireland-based Europa Oil & Gas, Kosmos has withdrawn from the joint operating agreements on deepwater Frontier Exploration Licenses (FELs) 2/13 and 3/13. Kosmos is also to withdraw its 75% stake in FEL 1/13, said its partner on that license, Antrim Resources, which has been looking for farminees on its 25% stake.
Industry commentator Malcolm Graham Wood said the move should not come as a total surprise, given that the Irish acreage has been "well down the US company's list of drillable prospects." Kosmos Energy has agreage along the Atlantic margin, with recent focus on Mauritania, where it made the significant Tortue-1 discovery recently, and Senegal and plans to drill there as well as offshore Suriname, Morocco and the western Sahara in 2015-2017.
Subject to an application being made to the Irish Authorities, Europa hopes to take over 100% interest in, and operatorship of, the two licenses it partners with Kosmos. Europe says FEL 2/13 and FEL 3/13 have the potential to hold gross mean un-risked prospective resources of approximately 1.7 billion boe. Antrim said it will discuss how to move forward with authorities. Europa will benefit from some $15 million of seismic survey work Kosmos has already paid for and processed, as well as current reduced rig rates for exploration drilling, CEO Hugh Mackay pointed out.
Anthony Potter, Antrim's CEO, said: "While we are disappointed with Kosmos decision not to continue, their decision to exit the Porcupine Basin should be considered in the broader context of their portfolio and markets. Several exciting prospects and leads have previously been identified on FEL 1/13 and despite volatile commodity markets and investment sentiment moving away from exploration we remain optimistic that FEL 1/13 would be an attractive addition to the right exploration portfolio."
Europa was also upbeat about the remaining potential on the Porcupine Basin licenses. "Given the record number of applications in Ireland’s 2015 Atlantic Margin Round, the board is confident there will be interest in partnering with Europa in both licenses," it said.
Ireland’s 2015 Atlantic Margin Licensing Round closed 16 September 2015. The Irish Authorities have reported they have received 43 applications from major, mid cap and small companies, the largest number of applications ever received in any Irish offshore licensing round. Europa has applied for multiple blocks in the 2015 Irish Atlantic Margin Licensing Round and has undertaken considerable proprietary technical work in relation to these license applications.
According to Europa, a Competent Persons's Review by ERC Equipoise announced on 12 May 2015 identified gross mean un-risked prospective resources of 1.5 billion boe over three prospects in FEL 3/13. On 16 June 2015, Europe announced that its then 15% interest in FEL 3/13 had a net mean un-risked NPV10 of US$1.6 billion.
Subject to Europa being reassigned a 100% interest in FEL 3/13, this net mean un-risked NPV10 will increase. Europa is the beneficiary of more than $15 million expenditure across both blocks and Europa has enjoyed a free carry on most of this expenditure. Work done includes acquisition of a state of the art 2565sq km of 3D seismic survey in 2013, delivery of a processed dataset and prospect inventory in 2014, which led to Europa’s CPR and valuation in 2015.
Europa’s CEO, Hugh Mackay, said: “Europa has been active in the Atlantic Margin since 2011. We have a very strong technical team and in particular have conducted substantial and independent technical work on the Atlantic Margin throughout most of 2015 in support of our CPR and valuation and our applications in the 2015 Atlantic Margin Licensing Round that closed on 16 September 2015. As a consequence we have an up to date and detailed understanding of the prospectivity of both licenses and have no hesitation in stepping up to assume operatorship of FEL 2/13 and 3/13.
“Whilst we are disappointed that Kosmos has elected to withdraw from Ireland we appreciate the necessity for portfolio rationalization in the current business environment and their decision brings opportunity to Europa. Drilling costs have already fallen substantially: day rates for rigs capable of drilling in the Atlantic Margin have reduced from $600,000 per day to $300,000 per day or less. We anticipate that the 2015 licensing round will bring new entrants into the basin including major and mid-cap oil companies. We are very confident in our technical and commercial work and look forward to updating the market as we take these licenses forward.”
Kosmos will remain operator during the period of its withdrawal from the contract and joint operating agreement.
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