By Stewart Dalby
London AIM-listed InfraStrata started out as a gas storage company before diversifying into exploration. As it starts out on an exciting five well drilling programme (two of which will be sunk this year) it has announced that first up with the drillbit is a well to recover salt cores on its Islandmagee gas storage project in County Antrim in Northern Ireland (InfraStrata has a 65 per cent stake).
The company has announced that the Islandmagee-1 well began drilling (spudded) at 18.00 hours on May 15 2015. Drilling operations are expected to take around 5 weeks. The well will be drilled to a total depth of around 1,700 metres.
The objective of the well is to confirm the feasibility of the development of an underground gas storage facility in salt caverns, by obtaining wireline data and core samples of the Permian salt to undertake analyses to further define the design parameters and cost estimate of the project.These results will enable the project developer, InfraStrata’s subsidiary Islandmagee Storage Ltd to complete this phase of work in Q4 2015.
The well has taken some time to come to fruition. The project appeared to be left on the shelf following the pull-out of partner, BP Gas Marketing, last year to concentrate on other projects. By then InfraStrata together with partners had spent over £5 million advancing Islandmagee.
The scheme also stalled because following the BP pull-out funding (£4 million) was lacking to drill the well. But the scheme started to move again in late 2014 when it was given a boost by the news of a €2.5 million (£1.9 million) 50 per cent matching grant from the EU towards the drilling of the Islandmagee-1 well.
InfraStrata recently finalised finding the matching funds to proceed. There has been a placing and Baron Oil announced, to coincide with the spudding of Islandmagee-1 news that, as announced on May 1 it had signed a convertible loan agreement with InfraStrata for the project ,to provide a secured loan of Euros 1.8 million with an option to convert the loan balance into an equity participation of 15 per cent in Islandmagee Storage Ltd.
For all the delays 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. When built in five years time it will consist of seven caverns and have a capacity of 16 billion cubic feet (500 million cubic metres) of gas. This is enough for one month’s supply for the whole island of Ireland and 60 days for Northern Ireland.
However, InfraStrata does not intend to stay in for the long haul “The next step in the process is to monetise our interest in the project,” CEO Andrew Hindle told Oilbarrel. He is 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 £6.08 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 says.
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 4.88 pence per share, up from the lows of 2.8 pence per share seen in March