UK and Ireland-focused Europa Oil & Gas reported Thursday that it has agreed a farm-in deal with a subsidiary of independent oil firm Kosmos Energy for its two licensing options in the South Porcupine Basin offshore Ireland.
The deal will see Kosmos acquire an 85-percent interest, and operatorship, of both the LO 11/7 and LO 11/8 licensing options in return for which Kosmos will fully fund the costs of a 3D seismic program on each license and pay 85 percent of the costs incurred by Europa to date.
In addition, if the companies agree to begin an exploration drilling phase on one or both of the blocks, Kosmos will also incur 100-percent of the costs of the first exploration well on each block. The first exploration wells on LO 11/7 and LO 11/8 have investment caps of $90 million and $110 million respectively. Europa said that costs in excess of this investment cap would see Kosmos fund just 85 percent of the additional amount, with Europa funding 15 percent.
Europa CEO Hugh Mackay commented in a statement:
"We are very pleased to have secured a respected leading independent such as Kosmos as a farm-in partner and operator for our Irish Licences. Kosmos are a highly experienced operator in frontier basins and pioneered the Cretaceous stratigraphic play that has resulted in significant exploration success in the Atlantic margin basins. We look forward to working with Kosmos and their involvement is a highly significant first step towards realising the potential value of our exciting prospects in a new hydrocarbon play located in an essentially undrilled basin offshore Ireland."
Mackay also noted that, with the Eirik Raude rig now in Irish waters and ready to drill Exxon's Dunquin well, "an exciting new chapter in the exploration of Ireland is starting and we are delighted to be part of it".
Oil sector analysts responded positively to the Europa/Kosmos deal. London-based finnCap commented that it was "a major milestone" for Europa. "Importantly, the deal not only provides funding, it also brings in a technically credible and experienced operator that helps validate the plays identified," a finnCap research noted stated Thursday.
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