Elixir Petroleum Limited has today confirmed that it has signed a Heads of Agreement to farm-out a number of its North Sea licences to Albion Petroleum Ltd. Under the farm-out arrangements, Albion will earn an interest in between three and five UKCS licence areas by funding at least C$10 million (£5 million) towards the cost of exploration wells to be drilled in these areas.
Both Elixir and its joint venture partner, Granby Oil and Gas plc, who are farming-out on the same basis and in proportion to their interests in each licence area, will make the assignment of interests to Albion. In licence areas where it contributes to the cost of a well, Albion will earn a 12.5% interest by funding 25% of the well cost, with the exception of Blocks 15 /13b and 13/25, where a 6.25% interest would be earned by paying 12.5% of the exploration well costs.
The first well is expected to be drilled later this year on Block 15/13b, which contains the Guinea prospect. It is a robust, four way dip-closed Palaeocene structure, which lies on trend with fields such as Balmoral and Dumbarton. The block is located about 20 km north east of the Piper oil field in a water depth of approximately 150m.
Block 15/13b was awarded as a Promote Licence to Granby in the 22nd Licensing Round in December 2004. A 35% interest was subsequently assigned to Elixir under the terms of an Elixir-Granby alliance agreement. It is expected that the Guinea well will be further farmed-down prior to the drilling of the first well.
The assignment of the licence interests to Albion is subject to the approval of the UK Secretary of State for Trade & Industry, the execution of a fully termed farm-in agreement to be completed shortly and Albion demonstrating financial capacity no later than 30 June 2006.
Albion Petroleum is a publicly traded Canadian company incorporated specifically to pursue international oil and gas joint venture exploration and development opportunities with local operators in the North Sea.
Russell Langusch, Elixir's Managing Director, said, "We are delighted to have secured a multi-well farm-out deal of this type with Albion. We expect to introduce another farminee party into the Guinea well to further reduce Elixir's cost exposure. This first well is likely to be drilled in the second half of 2006 and will provide our shareholders with more exploration activity".
Licence Participating Interests following Albion Farm-in
Licence Blocks Elixir Granby Albion Albion
interest cost
P1211 14/14b 43.75% 43.75% 12.5% 25%
P1288 14/8a,
14/9a
P1212 15/13b 32.81% 60.94% 6.25% 12.5%
P1209 13/19 43.75% 43.75% 12.5% 25%
13/24c
P1404 13/25 21.88% 21.88% 6.25% 12.5%
P1208 9/22 27.08% 27.08% 12.5% 25%
9/23c
P1213 16/1b, 27.08% 27.08% 12.5% 25%
16/2c,
9/26a