21st Apr 2006 09:27
Lansdowne Oil & Gas plc21 April 2006 Lansdowne Oil & Gas plc ("Lansdowne", "the Company" and the "Group") Placing and Admission to trading on AIM Lansdowne Oil & Gas plc is an oil and gas exploration company which holds oneFrontier Exploration Licence in the Donegal Basin and four Celtic Sea LicensingOptions, covering a total of more than half a million acres offshore Ireland.In February 2006, the Company completed a private placing which raisedapproximately £750,000 to provide working capital for the Group. Earlier today the issued share capital of Lansdowne was admitted to trading onthe AIM market in conjunction with a placing of 1,882,353 shares at an issueprice of 85p which raised £1.6 million before expenses. At the placing price,Lansdowne has a market capitalisation of £17.7 million. Key points • Lansdowne was formed in December 2005 to acquire Ramco Energy plc's ("Ramco") Irish exploration portfolio. • Lansdowne's strategy is to become an exploration / appraisal promoterfocussing on shallow water - low cost high value opportunities, identifying andworking up opportunities and then farming them out to achieve a carry throughthe drilling/project phase. • The Company will generally seek to retain 15-30% non-operator stakesin its assets. • Lansdowne's assets comprise: - one frontier exploration licence in the Donegal Basin including the Inishbegand Inishtrahull prospects (19.25%) - Four Celtic Sea Licensing options: Midleton (100%), Rosscarbery (77%), EastKinsale (100%) & Seven Heads Oil (74% - reducing to 29.6% subject to farm-outprogramme). The Celtic Sea licensing options were recently extended to 31December 2006. • Lundin, the Operator of the Donegal Licence, has commenced wellplanning work for the drilling of the Inishbeg well, which is expected to startin Q2 2006. This well will be drilled by the Petrolia rig, which it wasannounced this week has commenced mobilisation to the Irish sector to commence athree well drilling programme. Lansdowne are carried through the drilling andtesting of the Donegal exploration well. • Following the Placing the Company will have approximately £1.75million net cash, which will be utilised to conclude the technical work up theCeltic Sea assets and for working capital purposes generally. • The Group will also seek to identify and exploit new exploration andappraisal opportunities in the Irish and UK Continental shelves. • On Admission Ramco, through its subsidiaries, is interested in anaggregate of 17,953,308 Ordinary Shares representing 86% of Lansdowne. • John East & Partners Limited has been appointed as Nominated Adviserand Broker to the Company. John Greenall, Non Executive Chairman, commented: "Lansdowne was specifically set up to exploit the potential and demand that ispresent in the Irish market. We have an exciting portfolio of assets with anextensive work programme over the next two years. Our team is highly motivated and has in depth knowledge, built up over a numberof years, of the Irish continental shelf. Our Admission to AIM will provideLansdowne with the ability to move to the next stage of its development and takefull advantage of the opportunities available to us. " 21 April 2006 Enquiries: Lansdowne Oil & Gas Stephen Boldy, Chief Executive 01224 352200 Chris Moar, Finance Director College Hill 020 7457 2020 Paddy Blewer Ben Brewerton John East & Partners Limited 020 7628 2200 Johnny Townsend David Worlidge Website. www.lansdowneoilandgas.com Lansdowne's Assets The Group has a gas prospects in Donegal and three gas prospects and one oilprospect in the Celtic Sea as follows: Donegal Inishbeg and Inishtrahull (Non-Operator - 19.25 per cent. interest carriedthrough exploration well) The Donegal acreage lies around 70 km off the Northwest coast of Ireland,offshore County Donegal, in water depths of less than 125 metres. This acreagewas originally awarded as a Licensing Option in 2000 and this has now beenreplaced by the Donegal Licence which is valid until 19 January 2020, unlesssurrendered or revoked before that time. As part of the transition to a fullexploration licence, operatorship was transferred from Ramco to Lundin and afarm-out agreement was put in place, pursuant to which all of the Group's costsassociated with the drilling and testing of an exploration well to test thehydrocarbon potential of the Inishbeg prospect are to be carried by subsidiariesof Island Oil and Gas plc and Petroceltic International plc. Further details ofthis farm-out agreement are set out in the section below headed "Farmoutarrangements". Under the terms of the Donegal Licence, the Inishbeg well isrequired to be drilled by 20 January 2007 and Lundin, the Operator of theDonegal Licence, has commenced well planning work for the drilling of theInishbeg well which is expected to commence drilling in June 2006. Inishbeg Prospect Current mapping has identified a large four-way dip closed anticline at SherwoodSandstone level named Inishbeg. In its valuation report (as set out in the Company's Admission document) ScottPickford has assigned an overall chance of success of 12.5 per cent. for theInishbeg prospect, with the trap being considered robust, but risk remaining inthe source, reservoir and seal components. The economic evaluation of the Inishbeg prospect contained in the Scott PickfordReport, modelled a development scenario utilising two platforms, each with 12production wells producing dry gas, piped to shore to a receiving productionstation with compression facilities and from there entering the gas grid. Thefirst gas production was assumed to flow on 1 January 2011 and a gas sales priceof 30p/therm was used. The Scott Pickford Report's P50 case for the Inishbeg prospect indicatesrecovery of 873 bcf reserves (168 bcf net to Lansdowne) and using a 15 per cent.discount rate delivers a positive NPV of $472 million ($93 million net toLansdowne) and an EMV net to Lansdowne of $11.6 million. Inishtrahull Prospect There are additional opportunities present on the Donegal Licence acreage - theInishtrahull prospect and a lead in the West of the acreage, both of which havebeen mapped at the Triassic Sherwood Sandstone level. The evaluation of the Inishtrahull prospect contained in the Scott PickfordReport concluded that the chance of success was 12.5 per cent. as the risks areessentially the same as for the Inishbeg prospect. The economic modelling adopted in the Scott Pickford Report is similar to thatwhich was used for the Inishbeg prospect, but based upon a stand alonedevelopment for Inishtrahull. First gas flow was assumed to take place on 1January 2012 and a gas sales price of 30p/therm was used. The Scott Pickford Report's P50 case for the Inishtrahull prospect indicatesrecovery of 356 bcf (68.5 bcf net to Lansdowne) and using a 15 per cent.discount rate this delivers a positive NPV of $134 million ($25.9 million net toLansdowne) and an EMV net to Lansdowne of $1.6 million. Celtic Sea The Group holds four assets in the Celtic Sea, lying in water depths ofgenerally less than 100 metres. This portfolio has been built up with theoverall strategic objective of identifying gas prospects, which if successful,could be produced through a tie-back into the existing Seven Heads and Kinsaleinfrastructure, subject to access rights being agreed. Three of the assets areconsidered as gas plays - the Midleton Licensing Option, the RosscarberyLicensing Option and the East Kinsale Licensing Option. The proximity of the existing infrastructure means that even a modest gasdiscovery (c20 bcf - see East Kinsale analysis) in the area could becommercially viable. The Ballycotton field (c55bcf) was put into production in1991 when gas prices were significantly lower than the present day. In addition the Group holds the Seven Heads Oil Licensing Option over the deepercretaceous Wealden oil bearing reservoirs (restricted to a depth belowapproximately 1,250m (4,000 feet) sub-sea) in the Seven Heads acreage. Midleton (Operator - 100 per cent. interest) The Group's Midleton acreage comprises the southern parts of Blocks 49/11 and 49/12 and lies approximately 20 km Northeast of the Kinsale Head and Ballycottongas fields, in water depths of less than 100 metres. The prospectivity of the southern parts of Blocks 49/11 and 12 was highlightedto Ramco by Marathon who had mapped out a substantial structure. Following in-houseevaluation by Ramco, an application was submitted and the Midleton LicensingOption was awarded on 25 February 2003 for 18 months from 1 February 2003 to 31July 2004. Subsequently, the Midleton Licensing Option has been extended to 31December 2006. The producing reservoir in the Ballycotton field is the Cretaceous Greensand, orA Sand, which is also the case for the main reservoir in the Kinsale Head gasfield. The Greensand is also the prime reservoir target in the Midletonconcession and has been established to be present with good reservoir quality bythe 49/11-1 and 49/11-2 wells. During 2003 an experimental shallow seismicprogramme was carried out to improve imaging at shallow depths. Mapping of thisnew data and integration with previously acquired data has led to theidentification of a number of promising structures, one of which (the Midletonprospect) has been selected for working up for drilling. A seismic reprocessingproject is planned to finalise the details of the trap and to assist in locatingan exploration well. All the structures within the Midleton concession arewithin sub-sea tie-back range of existing facilities. Source, reservoir and trap are all considered by Lansdowne to be low riskelements of the Midleton prospect, with the key risk remaining being the sealingcapacity of the northern bounding fault. The Scott Pickford evaluation reachedsimilar conclusions and rated the overall chance of success as 32 per cent. The development concept used by Scott Pickford proposes a single verticalsub-sea producer tied back to the Ballycotton gas field, some 20 km from theMidleton prospect, from where the gas would be piped to the Kinsale Head gasfield which has compression facilities. The first gas production was assumed toflow on 1 October 2008 and a gas sales price of 30p/therm was used. The Scott Pickford Report's P50 case for the Midleton prospect indicatesrecovery of 44 bcf prospective resources (44 bcf net to Lansdowne) and using a 15 per cent.discount rate delivers a positive NPV of $56 million for Lansdowne and an EMVnet to Lansdowne of $9.8 million. Rosscarbery (Operator - 77 per cent. interest) The Rosscarbery acreage lies immediately North of the Seven Heads gas field inwater depths of less than 100 metres. The Rosscarbery Licensing Option wasgranted on 17 September 2003, for a period of one year from 15 September 2003.Subsequently, the Rosscarbery Licensing Option has been extended to 31 December2006. The Galley Head discovery well (48/18-1), lying in the Northeast part of theRosscarbery Licensing Option acreage and drilled by BP in 1985, tested gas at13.7 mmscfd from the Lower Cretaceous Greensand reservoir. In post-wellevaluation studies, BP identified a number of other structures, with the mainprospect being what is now called Rosscarbery. Since award of the Rosscarbery Licensing Option, a re-mapping of the Rosscarberyprospect exercise conducted by Ramco has confirmed its potential. Rosscarbery isa well defined structure with closure to the South formed by a large down to thebasin (South) fault that will juxtapose 'A' sands with chalk and dip closure ismapped to the West, North and East. Should the fault throw remain consistentthen the Wealden Sands are more likely to be juxtaposed against the Gault Clay.Fluid factor processing indicates a better chance for gas in the Wealden than inthe 'A' sand. Scott Pickford has assigned a chance of success of 19 per cent.for the 'A' sands and 35 per cent. for the Wealden Sands. AVO studies areplanned to look for anomalies that could be Direct Hydrocarbon Indicators. TheRosscarbery prospect is within sub-sea tie-back range of existing facilities. For economic evaluation purposes, the Scott Pickford Report has modelled successsolely at the Wealden sands level given it has the greater chance of success,with three sub-sea vertical production wells recovering 86 bcf, (66 bcf net toLansdowne) on a P50 basis tied back to the Seven Heads gas field, some 25 kmaway, from where it would be piped to the Kinsale Head gas field which hascompression facilities. The Scott Pickford Report assumes a 1 October 2008 first gas date for theRosscarbery prospect and an average selling price of 30p/therm which with adiscount of 15 per cent., yields a positive NPV of $76.2 net to Lansdowne and anEMV of $20.9 million net to Lansdowne. East Kinsale (Operator - 100 per cent. interest) The East Kinsale acreage lies some 20 km to the East of the Kinsale Head gasfield. The East Kinsale Licensing Option was granted on 19 November 2003 for aperiod of two years from 24 November 2003 and requires completion of a specifiedwork programme. Subsequently, the East Kinsale Licensing Option has beenextended to 31 December 2006. Work carried out to date by Ramco has consisted of mapping the available 2Dseismic data, which has identified a number of leads. A seismic reprocessingproject is planned to improve existing reservoir imaging. The East Kinsaleacreage is within sub-sea tie-back range of the Kinsale Head gas field. The key prospect in the East Kinsale acreage considered by Scott Pickford was atlower Cretaceous level (49/17-W) lying to the East of the Kinsale Head gas fieldand to the South, and updip of, the 49/17-1 exploration well. Prospect 49/17W was evaluated by Scott Pickford, with the main risk identifiedbeing trap configuration given the low relief of the structure, which assessedthe overall chance of success as being 20 per cent. For economic evaluation purposes, Scott Pickford assumed a single verticalsub-sea well tied back to the Kinsale Head gas field, some 20 km away, yielding21.5 bcf prospective resources (20.5 bcf net to Lansdowne) on a P50 basis. The Scott Pickford Report assumes a 1 October 2008 first gas date for block 49/17W and an average selling price of 30p/therm, which with a discount of 15 percent., yields a positive NPV of $24.2 million ($23.0 million net to Lansdowne)but the EMV is negative. Seven Heads Oil (Operator - 74 per cent. interest, reducing to 29.6 per cent.pursuant to a farm-out option) The Seven Heads Oil Licensing Option acreage lies beneath the Seven Heads gasfield, with the boundary between the two concessions lying at approximately1,250m sub-sea. The Seven Heads Oil Licensing Option was granted on 17 September2003 for 12 months from 15 September 2003. Ramco's interest in the Seven HeadsOil Licensing Option was acquired by Lansdowne Celtic on 13 February 2006.Subsequently, the Seven Heads Oil Licensing Option has been extended to 31December 2006. Within the Seven Heads Oil Licensing Option acreage, oil was successfully testedfrom three of the exploration or appraisal wells which achieved flow rates ofbetween 1,300 and 1,600 bopd. The reservoir sands are in the Cretaceous Middleand Lower Wealden sequences from 1,400 to 2,300 metres below sea level. The oilis light (39 to 42 degrees API) but contains relatively high wax contentsranging from 12 per cent. to 22 per cent. wax, which could require treatment toavoid production difficulties. The two main risks with the Seven Heads Oil prospect are the reservoircontinuity risk and the high pour point of the oil. The base case developmentplan aims to alleviate the reservoir continuity risk through a phaseddevelopment using wells tied-back to a wellhead production platform and thentransferring the oil to a leased FPSO. All the estimated recoverable oil and gas volumes from the Seven Heads Oilprospect are considered to be in the contingent resources category. The base case development plan results in the recovery of 23 mmbbls net toLansdowne and assumes a 1 January 2009 first oil date, with an average sellingprice of $35/barrel. Scott Pickford estimate that this results in a positive NPVof $71.9 million net to Lansdowne (on the basis of a 29.6 per cent. Lansdowneinterest). A farm-out has been granted in relation to the Seven Heads Oil Licensing Optionwhich, if effected, would leave the Group with a 29.6 per cent. interest in theSeven Heads Oil Licensing Option. Further details of this farm-out option areset out in the section below headed "Farm-out arrangements". Farm-out arrangements Farm-out arrangements are already in place in relation to two of the Group'slicences: (a) Donegal Licence - a farm-out agreement was entered into in January 2005pursuant to which all of the Group's share of the costs associated with thedrilling of an exploration well to test the hydrocarbon potential of theInishbeg prospect are to be carried by Island Donegal Limited and PetrocelticErris Limited both being subsidiaries of Island Oil and Gas plc (Island) andPetroceltic International plc respectively, with the Group retaining a 19.25 percent. interest in the Donegal Licence; and (b) Seven Heads Oil Licensing Option - in April 2004 a farm-out option wasgranted by ROGL in favour of Island, pursuant to which Island agreed to act astechnical manager and to fund ROGL's share (now Lansdowne Celtic's share) of thelicensing option rentals and the work programme relating to the Seven Heads OilLicensing Option, in exchange for which Island was granted an exclusive optionto farm in to 60 per cent. of the Group's interest in any successor orsubsequent authorisations to the Seven Heads Oil Licensing Option covering allor part of the same area. In order to exercise this option, Island is requiredto fully fund Lansdowne Celtic's share of the cost of the drilling and testingof an exploratory well on the Seven Heads Oil prospect (at a location and to adepth mutually agreed between Island and Lansdowne Celtic). If Island exercisethe foregoing option, and assuming the interests of the current holders of theSeven Heads Oil Licensing Option remain the same, Lansdowne Celtic will transferto Island a 44.4 per cent. interest in the Seven Heads Oil Licensing Option,which would result in the Group's interest in the Seven Heads Oil LicensingOption being reduced from 74 per cent. to 29.6 per cent. The Group is in the process of seeking farm-out partners for the Midleton,Rosscarbery and East Kinsale Licensing Options with a view to retaining a 15 to30 per cent. non-operator interest post farm-out. Presentations have been madeto a number of interested parties who have entered into confidentialityagreements and following dataroom visits, detailed evaluations are continuing. It is planned that this farm-out process will be concluded during 2006 and that,if supported by further technical work and farm-out arrangements are put inplace, applications will be submitted to the PAD to convert all or part of theareas covered by the Midleton, Rosscarbery and East Kinsale Licensing Optionsinto Exploration Licences, with the likelihood that wells will be committed fordrilling within the first two years of such Exploration Licences, during 2007and/or 2008. The Group's Assets Gas Prospective Resources Lansdowne Chance of Gross bcf Net to Lansdowne NPV15 Lansdowne EMV15 Interest success Lansdowne bcf $'m $' m ProspectInishbeg 19.25 per cent. 12.5 per cent. 873 168 93 11.6Inishtrahull 19.25 per cent. 12.5 per cent. 356 68 26 1.6Donegal Total 1,229 236 119 13.2Rosscarbery 77 per cent. 35 per cent. 86 66 76 20.9(Wealden)Midleton 100 per cent. 32 per cent. 44 44 56 9.8East Kinsale 100 per cent. 20 per cent. 22 21 23 0Celtic Sea Total 152 131 155 30.7Total 1,381 367* 274 43.9 Lansdowne Gross mmstb Net to Lansdowne Interest Lansdowne NPV15 mmstb $'m ProspectSeven Heads Oil 29.6 per cent. (Currently 74 79 23 72 per cent. Reducing to 29.6 per cent. If farm-out programme including drilling well completed)TOTAL GAS AND OIL 346 *this is equivalent to approximately 61 mmboe Note: The information set out in the above table relaying to changes of success,gross estimated contingent and prospective resources, indicative NPVs and EMVshas been extracted form the Scott Pickford report set out in the admissiondocument. Accordingly, the above table should be read in conjunction with suchreport. The NPV and EMV of the Group's interests, as reported by Scott Pickfordin such report, uses a discount factor of 15 per cent. per annum. Ireland Demand for natural gas in Ireland has displayed strong growth in recent years.The contribution of natural gas to Ireland's Total Primary Energy Requirementgrew from zero in 1978 to 25 per cent. in 2004 and government forecasts predictthat this figure could be around 35 per cent. by 2010. In addition, indigenousgas supplies are not adequate to satisfy the Irish demand at the current time.Consequently, Ireland is heavily dependent on gas imports from the UK. This highlevel of dependence has made the security of supply a key policy issue for theGovernment and has brought into focus the importance of more rapid developmentof indigenous energy sources such as oil and gas. Directors John Greenall (Non-Executive Chairman), aged 66, joined RC Greig & Co in Glasgowin 1960 becoming a partner in 1965. He assisted in the formation and subsequentfund raising of London and Scottish Marine Oil (LASMO) and Clyde Petroleum. MrGreenall was instrumental in creating Greig Middleton through the merger of RCGreig and WN Middleton in 1983. He joined The Stock Exchange Council in 1985 andserved on the Board of its Successor - The Securities Association. In 1994 he joined HCIB (a subsidiary of Guinness Mahon ("GM")) as director ofCorporate Broking. When GM was taken over by Investec in 1998 he headed up thecorporate broking team at that bank One of HCIB's specialist research areas wasthe Exploration & Production sector and he oversaw a number of flotations in thesector - the most recent being Venture Production before he retired in 2002. He is a non-executive director of The Sanctuary Group plc and RP&C InternationalLimited a niche investment bank based in London. Dr Stephen Boldy (Chief Executive Officer), aged 50, joined Ramco in March 2003.From 1980 to 1984 Dr Boldy worked as a petroleum geologist for the PetroleumAffairs Division of the Department of Energy in Dublin and then spent almost 19years with Amerada Hess Corporation, where his appointments included U.K.Exploration Manager and International Exploration Manager. Dr Boldy hasextensive experience of working Irish offshore basins and the basins West ofBritain and earned his Ph.D in geology from Trinity College Dublin. Christopher Moar (Finance Director and Company Secretary), aged 43, joined Ramcoin 1993 and was appointed Company Secretary in December 1996. Prior to this hewas a planning and financial accountant for Baker Oil Tools (United Kingdom)Limited. Mr Moar has an MA degree in Accountancy from Aberdeen University andqualified as a Chartered Accountant with Arthur Young in 1987. FollowingAdmission, Mr Moar will remain employed by Ramco as Vice President-Finance andCompany Secretary but will be responsible for the finance function in Lansdowneas one of the services provided by Ramco under the Ramco Services Agreement. Steven Bertram (Non-Executive Director), aged 46, is Managing Director of Ramcoand has been with Ramco since 1986. He was appointed to the Ramco board asFinance Director in 1991 and is now Managing Director of Ramco, having beenappointed to that position in June 2005. Mr Bertram has a background in oil andoil services companies gained through his time with Ramco and during hischartered accountancy training contracts. He has been involved with Ramco fromthe company's original USM listing through its move to AIM and its internationaloffer and listing on the American Stock Exchange. Mr Bertram has an MA Honoursdegree in Economics with Accountancy from Aberdeen University and qualified as aChartered Accountant with Arthur Young in 1984. Viscount Torrington (Non-Executive Director), aged 62, graduated from OxfordUniversity as a geologist in 1964. He served in technical and managerial roleswith Anglo American plc and Lonrho plc. In 1975, he became managing director ofthe Attock Oil Company, later Anvil Petroleum plc. The latter was merged withBerkeley Exploration in 1986, and acquired by Ranger Oil the same year. In 1987,he became a Director of Flextech plc and chief executive of Exploration &Production Services (Holdings) Limited, better known as Expro, a major UKoilfield services contractor. In 1995, he became Managing Director of HeritageOil & Gas Limited, later listed in Toronto as Heritage Oil Corporation. Viscount Torrington has held non-executive appointments in several companies andis currently chairman of CYC Holdings plc, a company admitted to trading on AIM,which facilitates Chinese entities wishing to list their shares in London. He isalso a non-executive director of a private Canadian oil and gas exploration andproduction company involved in West Africa. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Lansdowne Oil