Elixir Petroleum Ltd. report that during the June quarter significant progress was achieved on the Jaguar prospect in the Company's Northern North Sea Block 211/22 billion following the execution of a farmout agreement with DNO ASA.
DNO is an independent international oil and gas company with its head office located in Oslo.
The group's three geographical focus areas are Northern Europe, the Middle East and Africa. The 211/22 billion farmin represents a return to the UKCS for DNO after exiting several years ago.
Securing a Jaguar farminee is a major achievement for Elixir. It marks an important milestone towards drilling this potentially very large stratigraphic Jurassic prospect. If hydrocarbon-bearing, Jaguar could host several hundred million barrels of oil.
Whilst this type of play has received little exploration attention in the U.K. North Sea, an analogous play is proven on the Norwegian side of the median line.
Block 211/22 billion is a 21st Round Promote Licence which was purchased by Elixir from a small U.K. private company last December. Intensive technical work undertaken by the Company since acquisition has de-risked the prospect sufficiently to attract a farminee.
DNO will fund 92.5% of the costs of drilling an exploration well to secure a 60% interest, leaving Elixir with a residual 40% interest. The farmin agreement was executed in late June and the accompanying Joint Operating Agreement is close to finalisation.
DNO has commenced early preparatory work on the Jaguar well. Whilst the North Sea rig market remains relatively tight, there are well slot opportunities available. On current indications the well could be drilled in the first half of 2006.
The Company's first North Sea exploration well was drilled in late June and proved disappointing. Well 21/6b-6 on the Marquis prospect was spudded on Jun. 18, 2005 by the Bredford Dolphin rig operated by Century Exploration (U.K.).
It was targeting the Palaeocene Forties-Balmoral sands interpreted at a depth around 1,600 million. The reservoir sands were encountered close to prognosis but were found to be water-bearing. After reaching a total depth of 1,954 million the well was subsequently plugged and abandoned. Notwithstanding the negative outcome, the final well costs were below budget. Elixir has a 15% interest in Block 21/6 billion and contributed 10% of the Marquis well costs.
A full technical review has yet to be completed before any decision is taken on the future of the licence.
Applications for the 23rd U.K. Offshore Licensing Round closed on Jun. 9. From a record number of 1,329 blocks offered by the DTI, applications from 114 companies for 279 blocks were received, the largest number of blocks since 1972 and 115 more than for the 22nd Round conducted last year. Elixir is participating in the 23rd Round on two fronts. First, the Company's alliance partner, Granby Oil & Gas plc, has made a sizable number of applications from which, if successful, half of Granby's interest will be offered to Elixir. Second, the Company has made applications under its own name outside of the alliance framework.
The preparatory technical work for these applications was undertaken by Elixir and a third party. For obvious reasons these latter applications are not in competition with the Granby applications. Announcement of the 23rd Round awards is expected in late August or early September.
Technical work has been ongoing on the five licences across nine blocks awarded in the 22nd Licensing Round. Marketing to potential farminees will commence shortly with the objective of securing drilling activity during 2006.
Following a successful share placing that raised a total of GBP6.5 million, or A$16.3 million before expenses from European and Australian investors, the Company's shares were admitted to trade on the U.K. AIM market on May 16. Elixir is now dual listed on the ASX and AIM. The structure allows ready access to risk capital in both markets. The new equity funds provide a platform for the Company's multi-well exploration program in the North Sea planned over the next 18-24 months.
From its U.K. portfolio consisting of interests in seven licences across 11 blocks, Elixir is aiming to participate in a minimum of five potentially high-impact wells over the next two years. Success in any one case could be a company-maker for Elixir.
