Nautical Wraps Up Kraken Farm-Out to Canamens
Nautical Petroleum plc has entered into the last of a set of three farm out agreements with Canamens Energy North Sea Limited. This third agreement provides for the acquisition by Canamens of an additional 10% interest in the North Sea Block 9/2b (Kraken).
Together with the farm out of a 30% interest in North Sea Block 8/25a and a 35% interest in North Sea Block 3/27a, this agreement completes the three part set of farm outs to Canamens as advised in the May 15th announcement.
This farm out program is fully aligned with Nautical and the partner's strategy of sharing risk, optimizing use of resources and advancing asset appraisal and production development objectives. In combination these agreements are further evidence of the quality of opportunity represented in the Nautical license portfolio, especially in the 'cornerstone' Kraken discovery.
This farm out agreement provides Nautical with fully aligned partners in Blocks 8/25a, 3/27a and 9/2b.
Under the terms of the Kraken farm out, Canamens will:
- Carry Nautical’s full share of the planned appraisal well costs (being a 35% interest) and make a $6 million cash payment to Nautical on completion and,
- Make a further $ 5million cash payment to Nautical, contingent upon DBERR approval of the Block 9/2b Field Development Plan (FDP), Further key terms provide for:
- [a] A minimum dry hole cost of $ 20 million and maximum cost of $ 25 million on the planned Block 9/2b appraisal well.
- [b] The establishment of a joint development sub-committee for the purpose of progressing Kraken to FDP. The sub-committee will be chaired by Canamens and will report to the Joint Operating Committee.
Following the completion of this farm out the Kraken participations are:
- Nautical Petroleum (Operator) 35%
- Canamens 35%
- Celtic Oil Limited (wholly owned by SK Energy) 30%
As reported on November 16, 2007, Nautical and its partners drilled a very successful appraisal well on Kraken which indicated lighter oil (18.4 degrees API) than previously assessed and confirmed a substantial accumulation with an ODT in well 9/2b-2 some 71 feet lower than the predicted maximum oil-water contact in the pre-drill reserve estimations.
Since completing well 9/2b-2, the well data has been integrated with the reprocessed 3D seismic to determine a revised estimate of hydrocarbons in place and to locate the next well. Results of these further evaluations have been positive and have encouraged the Kraken partners to advance the timing of the next appraisal well. The well is now expected to be drilled in Autumn 2008.
Commenting on the farm out to Canamens, Steve Jenkins, CEO of Nautical, said, "We are pleased that Canamens have increased their equity interest in Kraken. Their support and assistance, along with our other partner Celtic, in the next phase of the development activity allows us to accelerate the process and will enable us to submit a Field Development Plan by the end of 2009."
Greg Coleman, CEO of Canamens, added, "This agreement concludes a series of steps which allows Canamens to gain a significant position in the area and to create a strong partnership with Nautical and Celtic in the 9/2b licence which we believe will maximize its value to all of the owners. We look forward to advancing the Kraken project to the next stage of development and FDP submission."