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Future Plans
In December 2008, Island completed a comprehensive internal review of its extensive portfolio of Irish and international exploration and production assets and has analysed its potential opportunities for short term, cash-generating, business growth.
The Company’s objective remains the same: to grow the value of Island by intelligent corporate action and utilising Island’s proven operator status to enter new projects and successfully monetise the current portfolio.
The main aims of the strategy will be to:
• seek asset sales to finance business growth: Island has a proven track record in this regard, as evidenced by its successful Amstel transaction
• pursue oil and gas field rehabilitation projects capable of generating initial revenues within 12 to 18 months from project start-up
• focus on low entry cost, high reward onshore exploration licences in strategically located areas where there are good short-term opportunities to attract major international players to fund initial exploration costs.
Reorganisation of Irish Assets Base
Island has completed its objective of establishing an integrated ‘Irish Gas’ portfolio of exploration, near development, production and infrastructure assets. This portfolio covers all aspects of the upstream spectrum in Ireland:
• Production: cash revenues from the Seven Heads gas field
• Satellite near-developments: the development of satellite gas fields close to the Celtic Sea infrastructure
• Gas storage: as security of supply develops as a key theme in the European gas market, the Celtic Sea gas fields have been identified by major players as having potential for either an Irish or western European gas storage facility
• Potentially very large exploration projects: Atlantic Margin exploration prospects, based around a World Class Triassic gas reservoir that could potentially address future security of gas supply issues for Ireland.
This portfolio is attracting interest from industry peers with a mandate to establish secure, politically stable, core areas with potential access to future gas resources. Island is seeking to work with industry players interested in taking an equity stake in this integrated gas business in order to progress additional international onshore oil and gas field rehabilitation projects that are being offered to Island on the basis of its proven track record as an operator.
International Portfolio Development
Island’s management team has been progressing technical, commercial and legal due diligence on several potential rehabilitation projects in Eastern Europe and the former Soviet Union for several months. Part of this process also involves building strong local partnerships and sharing the investment required with industry peers with a similar strategy to Island’s.
With assets in Albania, Island remains committed to identifying economically viable projects in the region, as the Board believes that it offers considerable geological prospectivity, combined with numerous commercial opportunities in the current economic climate.
Island has progressed its activities in Morocco to the stage where significant industry interest is being shown in its dominant acreage position in the highly prospective Tarfaya and Zag Basins, which already contain oil and gas discoveries.
Two significant value illustrations of Moroccan acreage can be seen in the substantial NAV certified by Netherland, Sewell & Associates on San Leon Energy’s share of the Tarfaya Exploration Permits, based on San Leon’s 30% equity interest and Best Estimate unrisked prospective resources of 192.9 mm boe and a High Estimate for unrisked prospective resources of 1,408 mm boe. Island, has a 40% interest in the Tarfaya Exploration Permits and also acts as Operator. Additionally, there has been considerable recent activity in and around this licence area, with major energy companies including PetroCanada and Genting taking Licences, which shows the considerable potential of the region.
There is very little opportunity for industry majors to acquire such large tracts of licensed acreage in similar basins in North Africa on the favourable fiscal terms available to Island. In the context of the security of European gas supplies these basins potentially offer another opportunity for industry peers to build a core area strategy.
Outlook
Island has remarkable strength for a company of its size. On the operational side, top quality technical evaluation expertise is enhanced by its proven operator status. On the corporate side it has had notable success in attracting farm-in partners and also in the asset development and sales processes.
Whilst the current global financial situation remains complex the company still anticipate that in the medium term oil and gas prices will strengthen. For a group such as Island, this presents the opportunity to become involved in valuable assets at basement valuations whilst this period of international financial distress prevails.