Lansdowne Oil & Gas (AIM:LOGP) Barryroe Farm-Out signed

 

Further to the RNS announcement of March 28, 2018 regarding the signing of a Farm-Out Agreement (“FOA”) with APEC Energy Enterprises Limited (“APEC”), the Company is pleased to now confirm that, following the completion of all required ancillary documentation and the receipt of both governmental consents, EXOLA, Lansdowne and APEC (collectively referred to as the “Barryroe Partners”) have signed a revised and binding Farm-Out Agreement (“Updated FOA”) which assigns 50% equity in SEL 1/11 to APEC.

 

Barryroe Farm-Out signed

· Binding Farm-out Agreement signed with APEC

· Enhanced Multi-well Drilling Programme of 5 firm Wells and 2 Option wells

· Increased Loan and Carry Agreement

· Preparation work to commence immediately, with first drilling anticipated in Q2 2019

 

Lansdowne Oil and Gas plc (“Lansdowne” or “the Company”) is pleased to announce a commercial update on Standard Exploration Licence (“SEL”) 1/11 that contains the Barryroe oil accumulation.

SEL 1/11 is operated by EXOLA DAC (“EXOLA”, 80%), a wholly-owned Providence subsidiary, on behalf of its partner Lansdowne Celtic Sea Limited, a wholly owned Lansdowne subsidiary (20%). The area lies in c. 100 metre water depth in the North Celtic Sea Basin and is located c. 50 km off the south coast of Ireland.

 

Summary of Updated FOA Terms & Conditions

The Updated FOA provides for a full cost-carried firm drilling programme comprising of the drilling and testing of four vertical wells and one horizontal sidetrack (collectively the “Drilling Programme”), plus the optional drilling of two further horizontal wells, together with cash advances to EXOLA for certain agreed project and operational costs totalling $19.5 million.

As certain operational, financial and commercial terms of the transaction have changed from those previously announced on March 28, 2018, the section below provides the final details of the Updated FOA:

 

Cash Payments

o With the signing of the Updated FOA, APEC will now proceed with the payment of $9.0 million to EXOLA for certain agreed front-loaded project related costs

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o A further $10.5 million payment will be made to EXOLA to cover future operational costs, such payment to be made 14 days prior to the commencement of drilling

 

Drilling Programme

o The drilling of four vertical wells to allow for the evaluation of the main Basal Wealden reservoir interval

o The first well to include the drilling of a sidetrack to provide a 200 metre horizontal section in the Basal Wealden

o Drill stem testing is planned for three of the four vertical wells, as well as the horizontal sidetrack

o The four vertical wells are located across the geographic extent of the Barryroe structure and are designed to test the full potential of the Basal Wealden

o Drilling to the underlying Purbeckian and Upper Jurassic section is planned in three of the four wells

o Planning for the drilling of these wells is already advanced, together with the consenting of the recently contracted Gardline “Ocean Observer” to carry out the well site survey operations during Q4 2018, subject to regulatory approval

o Rig procurement, based on a Q2 2019 mobilisation for the Drilling Programme is also well advanced, as are contracts with various oil field service providers

o At the completion of the Drilling Programme, APEC also has an option to drill, test and complete two further horizontal wells to the Basal Wealden reservoir interval (“Option Wells”)

 

Financing

o APEC is directly responsible for paying 50% of all cost obligations associated with the Drilling Programme, and the Option Wells (if applicable)

o APEC to finance, by way of a non-recourse loan facility (the “Loan”), the remaining 50% of all cost obligations attributable to EXOLA and Lansdowne in respect of the Drilling Programme, as well as the Option Wells (if applicable)

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o The Loan, drawable against the budget for the Drilling Programme, will incur an annual interest rate of LIBOR +5% and will be repayable from production cashflow from SEL 1/11 with APEC being entitled to 80% of production cashflow from SEL 1/11 until the Loan is repaid in full

o Following repayment of the Loan, APEC will be entitled to 50% of production cashflow from SEL 1/11 with EXOLA and Lansdowne being entitled to 40% and 10% of production cashflow, respectively

 

Operations

o EXOLA will remain as Operator of SEL 1/11 for the execution of the Drilling Programme

o Following completion of the Drilling Programme, APEC will have the right to become Operator for the development/production phase (subject to Ministerial consent)

 

Working Interest

o Following governmental approval for the assignment of equity to APEC,, the revised working interest will be APEC (50%), EXOLA (40%), and Lansdowne (10%), with EXOLA retaining the role of Operator of SEL 1/11

Commenting on the news, Lansdowne CEO Steve Boldy said:

“The finalization of this binding Farm-Out with APEC is a result of a great deal of hard work over the last few months. The revised, enhanced drilling programme will evaluate fully the potential of Barryroe, without additional upfront costs to Lansdowne and we look forward to this with great excitement”.

 


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