By Amy McLellan
After a run of successful test results from its Wressle-1 oil find in the East Midlands Basin onshore UK, Monday brought a reality check for backers of AIM-quoted Europa Oil & Gas when the nearby Kiln Lane-1 well came back dry. This is the nature of exploration but it did dent the recent surge in the share price, which slipped more than 11 per cent in morning trading to 6.5 pence.
Kiln Lane-1, a conventional exploration well in PEDL 181 in north east Lincolnshire with a pre-drill estimate of 2.9 million barrels, was drilled to a TD of 2,291 metres and encountered significant oil and gas shows. However, the sandstones in the Westphalian and Namurian intervals, which were penetrated in line with the pre-drill geological model, were found to be water wet and the well, which was drilled to schedule and on budget, will now be P&A.
Europa is the operator of the project with a 50 per cent stake in the 540 sq km licence, alongside fellow AIM company Egdon Resources, which saw its shares down 12 per cent, and privately-owned Celtique Energie Petroleum, both with 25 per cent. The downhole data will now be analysed as the partners mull next steps on this large exploration licence.
Europa’s CEO, Hugh Mackay, said the company was disappointed with the result but pointed out this was the first well on a large licence where there remain multiple leads. “The presence of hydrocarbon shows is encouraging and the quality of data recovered will enable clear decision making going forwards,” said Mackay.
In the meantime, the company remains busy with its ongoing testing operations at the Wressle discovery in PEDL 180, where hydrocarbons have been recovered from all three payzones tested to date. This will be followed by an extended well test later in the year, which will deliver more information about the new discovery and bring in some income from the sale of produced oil.
The big ticket item in the portfolio is the company’s footprint in the South Porcupine Basin off the west coast of Ireland: the AIM small cap has commissioned a Competent Persons Report on the project, where its partner, NYSE-listed Kosmos Energy has previously identified gross mean unrisked prospective resources of up to 1.5 billion barrels of oil.
That CPR is due out later in H1 2015 and should make interesting readers for backers of Europa. More important, of course, will be a decision to drill: if Kosmos decide to drill in summer 2016 then substantial work will need to be conducted in 2015 in order to be drill-ready, delivering plenty of newsflow and activity in the months running up to a high impact wildcat that could prove transformational for the £15 million market cap Europa.