Exciting times for Infrastrata with two big wells set to drill in the next six months

2015 is a big year for AIM-quoted InfraStrata, which is gearing up to drill two key wells in the next six months, including its maiden exploration well.   First up, however, will be a well to recover salt cores on its Islandmagee gas storage project in County Antrim (InfraStrata has a 65 per cent stake).

This is a highly strategic project with the potential to make a significant contribution towards security of gas supplies in this part of Europe, a point underscored by InfraStrata’s success in securing matching funding from the EC for 50 per cent of the well costs.  The AIM small cap is funded to cover the balance of the well costs following a placing priced at four pence per share that raised £2.1 million in February 2015.

All the regulatory approvals have been granted, including the “Consent to Drill” issued in April 2015, and the well is due to start drilling in May. This well will supply the engineers with the key geological information to help finalise design ahead of final investment decision. “The well is targeting the Permian salt sequence, about 1,400 metres depth, and we’re looking to core the entire sequence,” explains chief executive Andrew Hindle.

The analysis of these cores will help the engineers finalise the design and bring the project to the brink of being “shovel ready”, bringing to an end seven years of work and a £10 million spend by the AIM small cap.

“The next step in the process is to monetise our interest in the project,” says Hindle, aware that a project of this scale – it’s estimated to require project funding of £274 million to build the facility – will require a company with deeper pockets than £5.9 million market cap Infrastrata.

The other key project for 2015 is the Woodburn Forest prospect in PL 1/10 and P2123 in County Antrim. Again this will be the culmination of four years work.  “It’s taken a number of years to get to this point but this is a very exciting time for us,” Hindle tells oilbarrel.com.

Woodburn Forest-1 will be a conventional exploration well, and the Consent to Drill was granted in February but drilling is on hold until September until the close of the bird nesting season. This will be a key well, targeting 40 million boe in conventional Carboniferous, Permian and Triassic sandstone reservoirs.  Success would de-risk over 500 million boe of further potential upside within the licence areas.  As a result of farm-out deals with JV partners, including Brigantes Energy, Terrain Energy and US investment vehicle Larne Basin Exploration, InfraStrata expects to have a 27.5 per cent stake and be fully carried through the well.

Further ahead, the company has a 68.4 per cent stake in P1918 offshore Dorset in southern England, where the company is keen to drill the California Quarry-1 exploration well from an onshore location, targeting the 10 million boe Purbeck prospect in conventional Jurassic sandstone and limestone reservoirs. There’s additional interest here in the Colter prospect, which could host 50 million boe in the Triassic Sherwood Sandstone. It’s likely, however, that giving environmental restrictions over the timing of the acquisition of new 2D seismic data to finalise well design, uncertainty regarding the timing of the award of a petroleum licence over the onshore area and planning lead times that drilling will not take place before the initial term of the licence expires in February 2016, which means there will need to be a licence extension granted by DECC.

There’s also newly awarded acreage in the North Sea, including 50 per cent of P2222, and an asset swap with Fyrd Energy for a 25 per cent stake in P2235. This is the future, however: the focus for the next six months will be finalising Islandmagee and monetising its historic investment in this strategic project and then the excitement of its first exploration well in Northern Ireland.  Exciting times for the AIM company and its backers, with the shares trading at 3.88 pence per share, up from the lows of 2.8 pence per share seen in March.