Epi-V Acquires Stake in UK Upstream Gas Assets

Specialist upstream venture capital fund Epi-V is moving into exploration and production after committing to invest £10million to appraise two existing onshore gas discoveries in Northern England.

The fund has taken a significant stake in Moorland Energy Limited, a vehicle created last year to acquire licenses to extract hydrocarbons from surveyed and partially delineated discoveries.

The £10million investment will finance appraisal drilling on two exploration licenses which Moorland Energy has acquired from Warwick Energy Limited. In addition, Moorland has acquired 10MW of generation equipment from Warwick.

The first license contains an extension to the Wykeham gas field in North Yorkshire, which is 3D seismic defined and is estimated to contain significant reserves.

The second license contains a producing field at Elswick in Lancashire, a prospect interpreted to have 11 million barrels of recoverable oil and coal bed methane potential.

First stage drilling at the sites will commence in early November, 2008.

Moorland Energy is also examining opportunities to acquire further licences for known accessible reserves across the UK and mainland Europe

Gas-fired power is increasingly being viewed as a solution to preventing a shortfall in generation capacity over the coming decade, with industry body Eurogas expecting consumption to double from 123 million tonne oil equivalent (mtoe) in 2005 to 239 mtoe in 2030.

Epi-V's investment in Moorland Energy represents a diversification of its own portfolio of emerging technology and service companies within the upstream services sector.

The £50 million fund was set up in 2007 to invest between £2 million and £10 million in target businesses developing "disruptive" technologies and service innovations which have the potential to revolutionise existing processes and which will have significant future value to international oil and gas operations.

Over the past year it has completed an impressive seven deals including investments in Brinker Technology, Guardian Global Technology in the UK and Petro Tools in Norway.

Grant Emms, Chief Executive of Moorland Energy, said, "This deal is the first stage in Moorland Energy's strategy to acquire and develop existing assets which are either viewed as non-core by larger companies or not being fully exploited by under-capitalized license holders.

"Our first two licenses have proven reserves and significant potential enhanced by their strategic location close to existing facilities and most importantly to the National Transmission System.

"By working with Epi-V we've not only secured the funding required to make the most of these and other opportunities, we've also gained the support of a team which has a huge amount of industry understanding and experience in maximizing production."

John Hutchinson, the partner at Epi-V who led the deal, said, "Domestic hydrocarbon reserves are becoming attractive strategic assets as they will play an increasingly important role in meeting Europe's energy capacity and security needs.

"Rather than wildcatting, Moorland's strategy of taking control of proven but undervalued sites ensures that the business has clear sources of revenue generation and therefore significant potential for value creation.

"Diversifying our portfolio into exploration and production was a natural move. We are currently commercializing advanced measurement and drilling technology which we might apply to our own assets in order to maximize efficiencies.

"We will be working closely with the Moorland management team to ensure the maximum reserves are recovered."