Europa Oil & Gas (Holdings) plc is an AIM listed exploration and production company focused on Europe. It offers an attractive mix of highly prospective exploration assets in the Porcupine Basin offshore Ireland, the Berenx gas appraisal project onshore France, as well as interests in three producing assets onshore UK.
That’s the bold statement of new chief executive Hugh Mackay, who admits that when he joined the group in October it had an image problem.
The stock had fallen 85 per cent in the seven months prior to his appointment as a difficult period took its toll on investors' confidence.
Mackay initiated a full review of the company’s assets and commissioned a new competent person’s report to establish an independent valuation, which he hopes will anchor the share price going forward.
“I needed to properly understand what Europa has really got in the portfolio,” he said, speaking with Proactive.
“So I could make the decisions about the company’s future based on a realistic understanding of the assets, and what they are actually worth.”
“The CPR will give us a strong insight into the value of the assets we currently have, and enable us to communicate realistically with the investment community.”
Also the completion of farm-out talks and future acquisitions will be central to Europa’s future development, he explains.
Mackay says the new CPR report is expected next month. And along with a recently announced exploration and appraisal strategy he hopes it will provide investors with a clearer picture of what Europa is trying to achieve.
“We really want to make sure that we deliver on our promises and do what we say we’re going to do, that we ‘walk the talk’.
At the moment the group’s core is a UK onshore operation and appraisal assets in France.
Its modest production base is a cash generating engine that gives Europa a head start in terms of funding its growth ambitions.
Production is currently on target to meet management’s budgeted expectations, set at 200 barrels per day.
But Mackay gives a frank assessment of the current crop of Europa’s production assets.
There is no magic bullet that is going to double production here, he says.
The fields are in decline and the emphasis is on managing costs and the rate of decline. Some initiatives are ongoing to achieve this, and output has shown signs of improvement.
“Small wins can have a big impact on production, and therefore cashflow.”
Indeed, a combination of slightly better production and higher than forecast oil prices already mean that Europa has recently been generating over US$150,000 in extra monthly revenue in the first two months of 2012.
Europa is fully funded for its share of drilling costs for a new potentially high impact well in the UK in September this year.
This is likely to be the Egdon Resources operated Wressle prospect, in Lincolnshire, targeting the primary Chatsworth Grit reservoir.
And it is the first of three potential wells that Europa could participate in over the next 18 months or so – the other being the appraisal of the Broughton oil discovery (made by BP in the 1984) and the Holmwood exploration asset, which is currently awaiting a planning appeal.
Each of these projects has the potential to add approximately 10p a share to Europa’s current share price, according to Mackay.
Meanwhile Mackay says talks are underway over 5 potential farm-outs that could greatly enhance Europa’s portfolio – over its assets in France, offshore Ireland, Romania and Western Sahara.
Mackay is confident that Europa can begin to deliver these joint venture deals soon – although he remains coy about the ones closest to completion.
A deal for the French assets could make a big difference to the scope of Europa’s immediate plans as it could pave the way for two more drilling projects, if agreed soon.
There are, in fact, two separate discussions underway over the Bearn des Gaves permit, over two very different types of projects.
The Bearn des Gaves permit contains the Berenx gas discovery and is a two tier play which Mackay describes as a potential ‘company maker’.
Recent analysis identified a shallow gas play, which historically had been dismissed merely as a technical obstacle.
Meanwhile at depth Berenx is an appraisal play, which is about establishing the commercial ‘deliverability’ of a potentially large gas discovery.
The shallow play is higher risk geologically speaking, Mackay says, but it is also technically simpler and cheaper to assess – with each well having an estimated cost of €4 to 6 million.
On the other hand the deeper play is de-risked geologically but it is technically challenging and much more expensive at around €40 million per well.