EnCore Oil plc arrived on AIM via the reverse takeover of Oil Quest which had a number of working interest in blocks both onshore and offshore UK. EnCore raised £16.6m net of expenses at the time of admission to AIM and a further £3.4m in a private placing, providing adequate funds for what has been an aggressive portfolio building strategy. EnCore?s aim is to grow a portfolio with a range of prospects and then prove up reserves. The first goal looks complete, now it is time to build on the second.
Through the Oilquest reverse takeover, EO picked up twelve onshore UK licences in the Wessex, Weald and Cleveland Basins, including drill ready prospects at Cleveland. On the 15th of March EO (20% wi) announced their first drilling success on PEDL 068. Kirkletham-4 flowed gas from good quality reservoir sands at a rate of 5mmcfd. The gas well will need to be put on long-term flow test to establish the potential of the resource and the ability of the reservoir to maintain pressure while under production.
Two weeks later EO announced their second successful well, Westerdale-1. Results weren?t as exciting, nor as conclusive - there were two gas zones detected, and only one of the zones flowed at commercial rates (130mcfd). Initially it was thought that this was an appraisal of the Ralph Cross-1 discovery well drilled in 1966, however it now appears this may be an unrelated gas accumulation. Drilling plans for 2007 include potential wells at Markells Wood and Leigh Park in the weald basin, and possibly at the Westerdale and Kirkletham discoveries depending on further test results.
In April EO was approved as an operator on the six North Sea blocks that it had acquired from Petro-Canada UK Ltd. EO also picked up two North Sea blocks in the 23rd offshore licensing round - 18/5 and 19/1a - where a well is planned for 2007 (EO 25% wi) Through the Oilquest reversal EO also gained exposure to five central North Sea blocks, four of which it became operator. The blocks contain a number of prospects and leads and several undeveloped discoveries. EO is reprocessing the 3D seismic in order to better define these prospects and devise the way forward. The reprocessing should be complete by year end and then the management will then have to source a suitable rig.
Early last month EO entered into and agreement with AIM-listed Island oil and gas for an option for a working interest in Island?s Atlantic margin frontier licence FEL 1/04 which contains the undeveloped Connemara field. Connemara was discovered by BP in 1979 which flowed at a rate of 5,589 bopd from Jurassic reservoirs. In 1997, at a time of low oil price, Statoil attempted to appraise and develop the field by drilling two horizontal wells. Based on the analysis of the results of these wells Statoil relinquished the licence in 1999. Statoil's estimate of oil in place at that time was 220 million barrels. The reprocessing of both 2D and 3D seismic has been completed by IOG and they believe that there are less faulted areas within this field that have yet to be appraised and may lead to a better understanding of the reserve potential.
Beyond our shores, EO has signed a formal Production Sharing Contract for the Laguera Licence located offshore Western Sahara. The Laguera licence covers an area of approximately 20,000 square kilometres in water depths ranging from 0 to over 4,000 metres. EnCore has a 100% wi in the block, which is located immediately adjacent to Mauritanian Territorial waters. This licence is in the very early stages of exploration and will need extensive seismic work to bring prospects to drill ready status. Like all offshore wells, especially the deep water wells, extensive preparatory work is required to de-risk the targets. Offshore wells are high risk due to their capital intensive nature, but the hunt will be for the elephant-sized fields. Due to the size of the block it is likely that EO will seek JV partners for exploration once targets are identified.
EO is one of the fastest growing companies on AIM in terms of corporate activity since listing earlier in the year. They have been blazing the acquisition trail and actively adding to their acreage positions on a number of fronts. Encores strength at the moment lies in its exploration potential and active management, though it has yet to get some production under its belt. It is likely that they will seek joint venture partners for most of their offshore exploration, as a large cash pot can quickly disappear when drilling offshore due to high costs and long developmental timescales for North Sea discoveries.