Faroe finds a Valentine in Suncor – farms out 17.5% in Fenja to Suncor

Faroe has announced the sale of a 17.5% interest in the Fenja development to Suncor for USD54.5 million which includes the transfer of tax losses.

Faroe will retain a 7.5% interest which fully aligns its equity interest with that of the other fields in the Greater Njord Area (Njord, Bauge, Hyme and Fenja). The transaction crystallises value of the asset pre-development and reduces Faroe’s capex (estimated to GBP70 million).

The PDO for Fenja was submitted in December 2017 and the operator VNG expects recoverable reserves of 97mmboe (72% oil). Fenja contains the Pil and Bue discoveries and will be developed as a subsea tie back to Njord. Pil will be developed first using three horizontal producers supported by water and gas injection wells. Bue will be brought online at a later date.

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Dragon Oil increases stake in Block 9 to 45% from Kuwait Energy

Kuwait Energy has farmed out a 15% interest in Block 9, Iraq to Dragon Oil. Kuwait Energy will reduce its interest to 45% and Dragon Oil will increase its stake to 45%.

The 15% will be made up of the following:

• 8.57% for USD100 million cash;
• 6.43% in settlement of a dispute in favour of Dragon Oil

Full press release by Kuwait Energy follows:
Kuwait Energy Company is pleased to announce the signing of the Block 9, Iraq Farm-out Agreement with Dragon Oil Plc (a wholly-owned subsidiary of Emirates National Oil Company Ltd, the national oil company of Dubai).

As per the Farm-out Agreement, Kuwait Energy will assign a 15% participating interest in the Block 9, Iraq service contract comprised of 8.57% participating interest in Block 9, Iraq to Dragon Oil in consideration for USD 100m in cash; and 6.43% participating interest in Block 9, Iraq to Dragon Oil in settlement of a dispute with Dragon Oil in relation to a non-controlling interest in Block 9, Iraq.

The agreement was signed on 11 February 2018 by Ali Rashid al Jarwan, Dragon Oil Chief Executive Officer (CEO); and Abby Badwi, the CEO of Kuwait Energy.

Abby Badawi, Chief Executive Officer of Kuwait Energy, said: "This is a great moment for Kuwait Energy and Dragon Oil. The extension of our Block 9 partnership with Dragon Oil has meant that both Companies can work as equal equity partners on the concession allowing us to best utilise our joint technical expertise in delivering the submission of the Block 9 full field development plan to the Iraqi government. The reduction in future Block 9 capital expenditure exposure coupled with the material cash injection strengthens Kuwait Energy liquidity position going forward."

The assignment of the 15% participating interest in Block 9, Iraq from Kuwait Energy to Dragon Oil remains subject to Iraqi government and partner approval. Post granting of these approvals, Kuwait Energy will remain the operator with a reduction in participating interest from 60%-45%, Dragon Oil participating interest will increase from 30%-45% with the remaining 10% participating interest being held by Egyptian General Petroleum Company.

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Tortue unitisation across Mauritania and Senegal

The governments of Mauritania and Senegal have signed an Inter-Governmental Cooperation Agreement in another step forward for the Tortue gas development which straddles the border of the two countries. The field will now be unitised with an initial split of resources 50:50 and a mechanism for future equity redeterminations based on actual production and other technical data.

FID of the field remains on track, targeting year end 2018 with first gas in 2021. The BP-led joint venture is looking at a near-shore FLNG concept which will reduce costs significantly.

The unitised ownership will be BP 61% operator, Kosmos 29%, and government partners retaining the remaining 10%.

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Zohr II at Calypso offshore Cyprus

Eni has made a sizeable gas discovery offshore Cyprus which could accelerate the country’s path to gas exports. The Calypso-1 discovery was made on Block 6 which is dubbed as a “Zohr like” play.

Full announcement by Eni below:

Eni has made a lean gas discovery in Block 6 Offshore Cyprus with Calypso 1 NFW. The well, which was drilled in 2,074 meters of water depth reaching a final total depth of 3,827 meters, encountered an extended gas column in rocks of Miocene and Cretaceous age.

The Cretaceous sequence has excellent reservoir characteristics. An intensive and detailed data collection (fluids and rock samples) has been executed on the well.

Calypso 1 is a promising gas discovery and confirms the extension of the “Zohr like” play in the Cyprus Exclusive Economic Zone (EEZ).

Additional studies will be carried out to assess the range of the gas volumes in place and define further exploration and appraisal operations.

Eni is the Operator of Block 6 with 50% of participation interest while Total is partner with the remaining 50%. Eni has been present in Cyprus since 2013 and detains interests in six licenses located in the EEZ of Cyprus (in Blocks 2, 3, 6, 8, 9 and 11), five of which are operated.

Source: https://www.eni.com/en_IT/media/2018/02/eni-announces-a-gas-discovery-offshore-cyprus

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Kenya goes alone with first oil targeting 2021 - plays catch-up with Uganda

Kenya was left at the pipeline “altar” in 2016 when Uganda decided to export its crude via a Tanzanian pipeline instead. The years of work around a joint Ugandan-Kenyan pipeline went to waste as the two countries could not agree on the development with security as well as political factors hindering co-operation between the two countries.

Kenyan oil discoveries in the Lokichar Basin had been left in limbo with no export plan in sight. However, over the course of 2017, Kenya realised it had to go it alone and started evaluating plans for a standalone export pipeline. In October 2017 the Lokichar owners, Tullow, Africa Oil and Maersk, initiated a study including FEED for the proposed pipeline. The ministry announced at the time that it was planning for an 820km pipeline between Lokichar and Lamu at a cost of USD2.1 billion to be completed in 2021.

The pipeline is expected to be FID-ed in 2019 and it has been reported that significant work has been carried out on the routing which has to deal with the complications of security risk, avoiding nature reserves, population displacement, elevation as well as cost.

Tullow’s commitment to the pipeline was followed by a commitment by Total in January 2018, which appears to have been part of the deal to obtain approval for taking over Blocks 10BA, 10BB and 13T from Maersk as part of the Maersk Oil acquisition.

On 7th February, Tullow announced that it progressing Kenya further with plans for an initial small scale development of 210mmbbl with peak production of 60-80mbopd. This would be the first phase of a wider development which originally had a 560mmbbl 2C resource number and peak production of 100mbopd+.

The Tullow-led JV will develop the Amosing and Ngamia fields as an initial 210mmbbl “Foundation Stage” which will include the export pipeline to Lamu, allowing for earlier FID than a full scale project. Foundation Stage upstream capex is estimated at USD1.8 billion and pipeline capex is estimated at USD1.1 billion – this is significantly below the USD2.1 billion estimate announced last year and the USD2.7-3.0 billion a few years ago (for the Kenyan leg only).

This export infrastructure is critical for monetising the discoveries in the Lokichar and also unlock remaining exploration potential in Kenya along the pipeline route. Tullow is targeting an FID in 2019 with first oil in 2021/22.

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Kosmos' end of a winning streak with dry well at Requin Tigre

Kosmos Requin Tigre prospect was announced dry this morning. This was a "make it" well that had the potential to add 60bcf of gas in the Senegal/Mauritania trend and would have increased total gas discovered in the basin to over 100tcf. However, this dry well constrains Kosmos' growth in the basin with no further exploration drilling in area for now. The drillship will now proceed to test two oil prospects offshore Suriname commencing in early Q2 2018.

With three dry wells in a row, Requin Tigre, Hippocampe and Lamantin (the last two targeting liquids), Kosmos shine as an exploration company is now wearing off. It now follows in the footsteps of other E&Ps such as Tullow, which was once an exploration-led company but increasingly focussed on delivering on its projects and commercialising an inventory of discoveries.

For now, it appears that Kosmos' West African story is finished.

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Mitsui victory for AWE battle?

AWE’s board has recommended Mitsui’s all cash bid of A$0.95/share which was received on 28^th January. This superior offer follows a heated battle since the end  of last year.

• November 2017: CERCG cash bid of A$0.71/share conditional on due diligence, rejected following AWE’s assessment that it undervalued the company
• December 2017: CERCG revised cash offer of A$0.73/share
• December 2017: Mineral Resources scrip offer at A$0.80/share
• December 2017: Revised Mineral Resources cash and scrip offer at A$0.83/share – recommended by the AWE board on 21st December
• January 2018: Mitsui all cash offer at A$0.95/share

The Mitsui bid is comparatively clean – all cash, no further due diligence and FIRB approval already obtained. As Mineral Resources did not come back with a superior offer by the deadline of 2^nd February, AWE has entered into an implementation deed with Mitsui with a recommendation to shareholders by the AWE board. Mitsui has a right to match any superior offer and there is a break fee if AWE changes its recommendation.

Mitsui is a natural buyer of AWE and its assets with an established history in Australian E&P. It is in the Northwest Shelf LNG project with Mitsubishi on the west coast, in offshore Victoria gas and Queensland Coal Bed Methane gas project.

Absent any superior offers, Mitsui offer documents are planned to be dispatched to shareholders on Monday 12th February with the offer period for shareholders to accept the offer open until 20th March. The offer required 50.1% acceptances from shareholders to proceed.

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