EO. Encore Oil

 

TIDMEO. 
 
RNS Number : 4641U 
EnCore Oil PLC 
25 June 2009 
 

 
 
Press Release 
 
 
For immediate release: 25 June 2009 
 
 
EnCore Oil plc ('EnCore' or 'the Company') 
 
 
Activity Update 
 
 
EnCore Oil plc is pleased to announce an update on its activities. 
 
 
OFFSHORE ACTIVITIES 
 
 
Breagh: Following the successful testing of the Breagh horizontal well in 
January 2009, located in block 42/13a in the UK Southern North Sea, the company 
confirms that along with its partners, it is now in exclusive negotiations with 
a third party with regards to the sale of an aggregate 70 per cent equity 
interest in the Breagh gas discovery. EnCore intends to sell the whole of its 15 
per cent equity in this and the adjacent licences. A sale and purchase agreement 
is expected to be signed in the coming weeks and a further announcement will be 
made at that time. 
 
 
Cladhan: (formerly known as Bowstring East) Plans are underway for an appraisal 
well to be drilled on the Cladhan light oil discovery located in block 210/29a 
in the UK Northern North Sea. Timing of the well is still to be finalised, but 
it is likely that this will be Q4 2009 or Q2 2010. EnCore holds a 16.6 per 
cent. interest in the discovery and the licence operator is Sterling Resources 
Ltd. The initial well, drilled in November 2008, confirmed the presence of a 
stratigraphically trapped 110 ft light oil column with no apparent oil-water 
contact. 
 
 
Ceres (formerly known as Barbarossa): Located in the UK Southern North Sea block 
47/9c, Ceres is expected to begin first production in Q4 of this year. EnCore 
has a 10 per cent. interest in Ceres subject to a 5 per cent. buy back right by 
a previous owner. The well is being developed as a subsea tieback jointly with 
the nearby Eris discovery. 
 
 
Catcher (EnCore 15 per cent.): In May, the Company assumed operatorship of 
blocks 28/9 and 28/10c following licence operator Oilexco being placed into 
administration. The Company is now working with partners, Premier Oil, Nautical 
Petroleum and Wintershall, to finalise a plan for a well on the Catcher prospect 
which is likely to be drilled in 2010. 
 
 
Cobra (EnCore 25 per cent. Operator): Following the drilling of the Cobra 
appraisal well (48/2c-5) in 2008 the Group has undertaken a number of subsurface 
geotechnical studies and is currently carrying out a fracture stimulation study 
with a view to redrilling the 48/2c-5 well as a horizontal well and completing 
it with fracture stimulation. 
 
 
Bennett (EnCore 70 per cent.): In 2008, 525 km of 2D seismic data was acquired 
and 150 square km of 3D data was reprocessed to better image the Bennett 
prospect, located in block 43/15a. The new data has now been interpreted and the 
Company is seeking an additional farm-in partner with a view to drilling a well 
on the Bennett prospect possibly in 2010. 
 
 
Ireland: Following the acquisition and interpretation of new seismic data in 
2008, Island Oil and Gas (operator) has commenced a scoping reservoir 
engineering study to evaluate injection and withdrawal rates for conversion of 
the Old Head gas field (EnCore 15 per cent.) to a gas storage facility early in 
the future production life of the field. Subject to the results of the 
engineering and facilities study, Island will also investigate the potential 
conversion of the Schull gas field (EnCore 12.5 per cent.) to a gas storage 
facility. 
 
 
25th Offshore Licencing Round: EnCore, together with a number of 
co-venturers, was awarded four licences in the UK 25th Round. Consistent with 
our capital management strategy, we did not commit to significant work 
programmes on any of the licences awarded. Additionally the Company holds an 
option (but not an obligation) to participate at up to 30 per cent. equity on a 
ground floor basis in a firm well programme on a licence awarded to a another 
party. 
 
 
 
 
 
 
ONSHORE ACTIVITIES 
 
 
EnCore welcomes the recent decision by the Court of Appeal in the Bocardo vs 
Star case, relating to claims for sub surface trespass. Subject to any future 
appeal decision in favour of Bocardo, the result is regarded as a positive 
clarification for our onshore licence portfolio. 
 
 
Markwells Wood and Havant: The Operator, Northern Petroleum has advised that the 
access track and site build for the well at Markwells Wood (PEDL126, EnCore 10 
per cent) began in March 2009 and it is expected that the well will be drilled 
in Q4 2009 or Q1 2010 depending upon rig availability, and possibly in 
conjunction with a well on the Havant Prospect. 
 
 
Kirkleatham (EnCore 20 per cent.): Progress has been made at the Kirkleatham gas 
discovery in licence PEDL068 operated by Egdon Resources, with the outline 
agreement in January 2009 of terms for gas sales for power generation on the 
Wilton site. A planning application has been submitted and Egdon is targeting 
first gas sales by the end of 2009. 
 
 
Biscathorpe: 3D Seismic reprocessing work has now been completed on our recently 
awarded Biscathorpe licence (PEDL 253, EnCore 60 per cent. and Operator) and the 
partnership will be seeking farm-in partners with a view to drilling a well to 
appraise the Biscathorpe structure in 2010 or 2011. The structure, located updip 
of the Keddington and Saltfleetby fields, was originally drilled by BP in 1987 
and is interpreted to have encountered thin hydrocarbon bearing sands. 
Biscathorpe represents one of the larger remaining unappraised onshore 
structures, with significant stratigraphic upside potential. 
 
 
PEDL 089 and 1153: EnCore and Northern Petroleum (Operator) have both agreed to 
reassign all their respective interests in onshore licences PEDL 089 (EnCore 20 
per cent.) and P1153 (EnCore 20 per cent.) to Wessex Exploration, in return for 
Wessex settling their outstanding cash calls. Following additional seismic 
studies which were performed on the licences, and under the relevant terms of 
the farm-in agreements with Wessex, both EnCore and Northern concluded that we 
did not wish to progress any further activity on this licence. 
 
 
 
 
GAS STORAGE 
 
 
Gas Storage (EnCore 100 per cent.): On 28 January 2009, EnCore announced that 
Star Energy (a wholly owned subsidiary of Petronas) no longer wished to proceed 
with the Front End Engineering and Design phase of the Esmond gas storage 
project, a requirement of Star Energy's farm in agreement with EnCore. As a 
result, Star's 50 per cent. ownership of the Esmond and Gordon licences has now 
reverted back to EnCore. Esmond and Gordon are located on UK Southern North Sea 
blocks 43/13a, 43/15a & 43/20a. 
 
 
The Company is continuing with work on gas storage development options and will 
be seeking potential new partners or new owners to help move the project 
forward. 
 
Commenting on recent activity and the current market, Alan Booth, EnCore's Chief 
Executive Officer, said: 
 
 
"I thought it might be useful to reflect not only our current status and our 
future plans, but also to consider whether our original strategy as a company 
was the right one or whether we could, or should, have done things differently. 
 
 
The last nine months of market and credit turbulence have demonstrated the 
market's strong desire to re-price risk. Oil and gas exploration and appraisal 
is by its very nature a risky and capital intensive business, and the market has 
now decided that these risks are higher than it either was led to, or wanted to, 
believe and share prices have moved accordingly. As a company we took a 
conscious decision not to over-leverage or over-commit ourselves by taking 
readily available debt and/or quasi debt in an overheated market. Whilst we 
received some criticism at the time, we believe that this was the right 
decision. Bidding on work programmes on new licences (which are, of 
course, financial commitments) has also been heavily tempered by both lack of 
further equity capital and a very tight market for attracting farm-in partners. 
As the oil price fell from $140 to $40 the demand, both from potential farminees 
and equity investors, for "near term drilling opportunities" with a rig contract 
in place vanished almost overnight. Indeed the main question became "do you have 
an ability to defer your activity and reduce capital spend?". As can be seen 
from the lack of drilling activity in 2009, we feel we were reasonably well 
placed to do that. We are pleased that we were not tied into long term contracts 
for rigs, or trying to develop modest fields in $100+ cost environments whilst 
facing $40 per barrel revenue streams. Our relatively conservative strategy has, 
I believe, helped us weather the storm better than some. However if oil was 
still currently trading at $140, I'm sure we would have received some criticism 
for being 'risk averse'. 
 
 
Our strategy is to find and appraise oil and gas fields to the natural point in 
their life cycle that give us the best return for the amount of capital 
invested. Many of our projects are now at that point in their life cycle, 
although some have arrived at that point sooner than we might have hoped because 
of the equity and credit crunch. We are now looking to sell some of these 
assets. The principal asset of course is Breagh, which is at an advanced stage 
in the sale process. We are also seeking to create tangible value from our Irish 
discoveries, now that the ownership of Kinsale has been settled. Our onshore 
portfolio has never attracted the market's attention, mainly due to perceived 
relative immateriality, and we are currently considering how we might best 
achieve recognition of this value for our shareholders. It contains a relatively 
balanced portfolio of pending production from Kirkleatham and near term low risk 
appraisal drilling as well as a high potential exploration target. 
 
 
Of course gas storage has featured heavily in our minds over the past year. Now 
we own these assets 100%, we feel that we are better placed to seek to achieve 
value for them, although the market for such assets is still flat. This is 
mainly because of the level of capital investment required and a relatively 
depressed gas market. We are currently completing the revised development plan 
and associated economic model to account for the partially repressurised lower 
reservoir. Whilst recent events would strongly suggest that current UK storage 
appears to be as much dedicated to fulfilling European gas shortages as the 
UK's, it would seem there should be a political imperative to encourage the 
development of more gas storage with a more strategic element, although it 
appears that the market is being left to sort this out. Whilst there is a 
widespread recognition of these facts, the market interest for our asset is 
still uncertain. However we will keep our shareholders updated on any 
significant developments. 
 
 
As significant shareholders, the Directors are aligned on creating value, and 
not just creating continued employment for ourselves. We will therefore continue 
to strive to create the maximum value for our shareholders". 
 
 
 
 
 
 
For further information, please contact: 
 
 
+--------------------------------------------------+--------------------------+ 
| EnCore Oil plc                                   | www.encoreoil.co.uk      | 
+--------------------------------------------------+--------------------------+ 
| Alan Booth, Chief Executive Officer              | +44 (0)20 7224 4546      | 
+--------------------------------------------------+--------------------------+ 
| Eugene Whyms, Chief Financial Officer            |                          | 
+--------------------------------------------------+--------------------------+ 
| Yvonne Fraser, Investor Relations Manager        | +44 (0)7957 241 408      | 
+--------------------------------------------------+--------------------------+ 
|                                                  |                          | 
+--------------------------------------------------+--------------------------+ 
| Aquila Financial Limited                         | www.aquila-financial.com | 
+--------------------------------------------------+--------------------------+ 
| Peter Reilly                                     | +44 (0) 118 979 4100     | 
+--------------------------------------------------+--------------------------+ 
|                                                  |                          | 
+--------------------------------------------------+--------------------------+ 
| Hanson Westhouse Limited                         |                          | 
+--------------------------------------------------+--------------------------+ 
| Tim Feather                                      | +44 (0)113 246 2610      | 
+--------------------------------------------------+--------------------------+ 
| Matthew Johnson                                  |                          | 
+--------------------------------------------------+--------------------------+ 
 
 
 
 
 
 
 
 
Notes to Editors: 
 
 
EnCore Oil plc (LSE:EO.) is an oil and gas exploration and production (E&P) 
company quoted on AIM. 
 
 
It is not the Company's aim to build a full cycle E&P company. The principal 
strategy is to create shareholder value through the successful exploration and 
appraisal of prospects and discoveries. The Company will seek to monetise or 
exchange the asset at the appropriate point in its life cycle and return value 
directly to shareholders wherever possible. 
 
 
EnCore has an experienced and proven management team, a number of whom were 
responsible for the discovery of the Buzzard field in the UK North Sea, which 
currently produces over 10 per cent. of the UK's total oil production. 
 
 
All EnCore's commercial and material technical evaluations are undertaken 
in-house by the EnCore team. This brings both continuity to the management and 
development of the assets and an ownership that is vital to unearth the best and 
most creative new ideas and opportunities. 
 
 
EnCore currently holds a balanced portfolio of interests in licences both on and 
offshore, primarily focused on the UKCS. 
 
 
www.encoreoil.co.uk 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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