Europa Oil & Gas is punching above its weight, its CEO has said.
Company leader Hugh Mackay said he was “confident the inherent value” of the firm’s portfolio of multistage licences will be realised.
“Against a backdrop of low oil prices, 2016 saw excellent progress made in delivering on Europa’s twin strategies: growing its licence base in our chosen markets of offshore Ireland and onshore UK; while at the same time actively managing our existing projects to maximise value for our shareholders,” he said.
“Most notably, Europa has become a leading explorer in Atlantic Ireland with one of the largest licence positions and a strong and diversified portfolio. Atlantic Ireland is a rapidly emerging exploration hotspot which this year saw the arrival of majors including ExxonMobil, Nexen and Statoil in the latest Irish licence round. Meanwhile in the UK, we secured two sales and a farmout which will enable us to fund our share of the costs associated with bringing the Wressle discovery into production and drilling the Holmwood well in the Weald basin in 2017.”
The firm won five of the 28 licences awarded in the offshore Ireland round.
“Our new licences provide Europa with exposure to all the various play types which have attracted the majors to the region: Paleocene, Cretaceous Shelf, Cretaceous Fan, Syn-rift, Pre-rift and Triassic gas. In particular the Syn-rift play, which yielded Statoil’s Bay du Nord discovery in the Flemish Pass, offshore Newfoundland in 2013 and recently attracted exploration investment of over C$2 billion, is hoped to be developed in Atlantic Ireland,” he added.
“Europa has a range of prospects from deepwater high risk frontier exploration to shallow water, lower risk infrastructure led exploration next to the Corrib gas field. We are currently focused on securing farm-out partners for our South Porcupine licences and at the same time conducting technical work across all the licences to mature leads to prospects and prospects to drill ready. By being exposed to all the major plays and basins currently being targeted in the region, Europa stands to benefit from the success of other operators and not just our own. With Providence Resources looking to drill in 2017, Woodside Petroleum the following year, and with newly arrived majors having already acquired seismic on their licences, we predict an increase in exploration drilling in Atlantic Ireland over the next five or six years. Europa is therefore well placed to benefit from any exploration success.”
The firm also has a stake in the onshore Wressle discovery, which is due to come on stream in 2017. The addition will increase Europa’s production from 100 boepd to 220 boepd.
“At this level, we expect Europa will have a positive cash flow from operating activities at oil prices above US$30 per barrel,” he said.
“Aside from generating funds for reinvestment, the two farm-outs highlight the value attributed by the industry to UK onshore production or near production assets compared to the value ascribed by the market. Following the sales we value our remaining 20% interest in the two licences at £3.7 million. Combined with the consideration for the sale of a 13.3% interest in both licences, we believe more than half our current market capitalisation is accounted for by PEDLs 180 and 182 alone.
“The read across is that the other half of Europa’s market capitalisation comprises the above-mentioned industry leading position in Atlantic Ireland, as well as our other UK onshore licences. These include three fields which produced 123 boepd in the year ended 31 July 2016; a 32.5% interest in the Holmwood prospect, which we rank as one of the best undrilled conventional prospects onshore UK and that we intend to drill in 2017; a 25% interest in the Hardstoft oil field PEDL299 on which gross 2C contingent resources of 3.1 million boe and gross 3C contingent resources of 18.5 million boe were identified in a CPR issued by our joint venture partner Upland Resources; and a 45% interest in PEDL343, which contains the Cloughton gas discovery. As we continue with our strategy to monetise our asset base through the drillbit, farm-outs and other corporate activity, we are confident the inherent value of our portfolio of multistage licences will be realised.”
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