Kea Petroleum plc, the oil and gas company focused on New Zealand, announced Friday the relinquishment of its Mercury permit, PEP 52333, offshore Taranaki, and an update on the ongoing strategic review.
This permit was awarded to Kea Oct. 13, 2010. The permit covers an area of 89.7 square miles (232.5 square kilometers), mainly offshore in the north Taranaki area.
As part of an agreed work program Kea acquired about 45.9 square miles (119 square kilometers) of 3D seismic data and, following interpretation of the data, identified a 6.2 square miles (16 square kilometers) 3-way dip and fault closed prospect with original resource potential estimated by management to contain 108 - 688 (P90 - P10) million barrels of oil in place.
Kea has presented the prospect to a number of potential farm-in partners; however, given the present challenging environment resulting from the fall in the oil price and lack of success in recent offshore exploration in New Zealand, it has not been possible to reach a satisfactory agreement to commit to drilling an offshore well before September.
Therefore the Board has decided to surrender the permit to New Zealand Petroleum and Minerals and to stop any further expenditure on the prospect.
Following Kea's announcement Feb.16 (the Announcement), the strategic review continues under the advice of Rockpoint Corporate Finance Limited (Rockpoint) and, within the context of the "formal sale process" (as described in the Announcement and in accordance with note 2 on rule 2.6 of the City Code on Takeovers and Mergers (the Code)), a number of potential funding partners have reviewed the technical data on the Shannon and Mauku prospects.
Ian Gowrie-Smith, chairman of Kea Petroleum, commented:
"We are disappointed that we have been unable to conclude a farm-out of the Mercury prospect but it is prudent to surrender the permit. Our limited resources must be focussed on our lower cost onshore permits at Mauku and Puka as we seek to secure funding to enable the drilling of our Shannon prospect. Rockpoint's strategic review process is at an early stage and we will provide further updates in due course."
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