22 July 2009 - Sale of EnCore SNS Ltd (Breagh Gas Discovery)
Press Release
For immediate release: 22 July 2009
EnCore Oil plc (‘EnCore’ or ‘the Company’)
Sale of EnCore SNS Ltd (Breagh Gas Discovery)
EnCore Oil plc (LSE: EO.) announces that the Company has signed Sale and Purchase Agreements with RWE Dea UK SNS Limited (“RWE Dea”) for the sale of its 15 per cent. interest in the Breagh gas discovery on Block 42/13 and surrounding acreage in the UK Southern North Sea. RWE Dea will pay total cash consideration to EnCore of US$68.8 million, with the deal expected to complete in approximately 4 to 6 weeks. There is not expected to be any tax payable by EnCore on the sale. All Breagh co-venturers have sold their interests to the same buyer, other than Sterling Resources which has elected to retain a 30 per cent. non-operated interest from its original 45 per cent. share. EnCore and its co-venturers were advised on the transaction by Standard Chartered.
On completion of the deal, and receipt of the sale proceeds, approximately 20 per cent. of the consideration (US$13 million to EnCore) will be placed in an interest bearing escrow account for 12 months as security against any potential warranty or indemnity claims by the purchaser.
The Board will meet shortly to consider a full range of options for the application of the sale proceeds in line with its previously stated strategy of returning value to shareholders. The options to be considered will include seeking shareholder approval for a share buyback and/or a capital restructuring scheme and also the potential for opportunistic investment in strategic assets.
Commenting on the sale, Alan Booth, EnCore's Chief Executive Officer, said:
“It is close to three years since EnCore acquired its interest in Block 42/13, and the Company, together with its partners, has drilled three wells to appraise the 1997 discovery in a technically complex structure.
“We are very pleased to have proved up a significant gas discovery, and in line with our strategy we have now disposed of Breagh at a time in its lifecycle before it requires further significant capital injections, as it progresses to its development phase. We are pleased that in RWE Dea, the Breagh discovery will now be taken forward by a proven operator with the capital and technical resources to fully exploit the field.
“EnCore will continue to rationalise its portfolio of assets and seek to create value for our shareholders, particularly through those parts of the portfolio we feel are not fully recognised. We do not expect to commit to further exploration drilling activity in the near term other than on Catcher and Cladhan which we expect to be drilled in 2010. In the meantime we will seek to progress our gas storage, Irish and onshore portfolios, whilst maintaining capital flexibility.”
For further information, please contact:
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EnCore Oil plc
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Alan Booth, Chief Executive Officer
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+44 (0)20 7224 4546
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Eugene Whyms, Chief Financial Officer
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Yvonne Fraser, Investor Relations Manager
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+44 (0)7957 241 408
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Aquila Financial Limited
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Peter Reilly
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+44 (0) 118 979 4100
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Hanson Westhouse Limited
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Tim Feather
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+44 (0)20 7601 6100
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Matthew Johnson
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Background to EnCore’s interest in Breagh
EnCore acquired its interest in Block 42/13 and the surrounding acreage via the acquisition, in October 2006, of Grove Energy (UK) Limited. Grove Energy (UK) Ltd had, in turn acquired the block in the 22nd UK Licensing Round, and acquired the surrounding acreage (Blocks 42/8, 42/9, 42/12a and 42/14) in the 23rd UK Licensing Round.
For reasons connected with the process of the acquisition of Grove Energy (UK) Limited, EnCore has held a one per cent. interest in block 42/13 in EnCore Petroleum Limited, while the remaining 14 per cent. interest in block 42/13 has remained in EnCore SNS Limited (formerly Grove Energy (UK) Limited) together with the full 15 per cent. of blocks 42/8, 42/9, 42/12a and 42/14. EnCore Petroleum Limited is selling its one per cent. interest, and EnCore Oil plc is selling its entire shareholding in EnCore (SNS) Limited.
Exploration and Appraisal of Breagh
Two wells had previously been drilled on the acreage. The first was drilled by BP in 1968 and was dry, and the second was drilled in 1997 by Mobil. This well, 42/13-2, encountered a 450 ft gas column within the Carboniferous reservoir and when tested, flowed at an uncommercial 3 million standard cubic feet per day (mmscfd).
Since EnCore acquired its interest in Block 42/13, the Company, together with its partners, has drilled three wells to appraise the 1997 discovery.
Well 42/13-3 was completed in November 2007 and tested dry gas at a maximum rate of 17.6 mmscfd through a 56/64 inch choke. The well encountered a possible gas-water contact in line with the original 42/13-2 discovery well giving a gross gas column of 460 feet.
Well 42/13-4 was drilled in October 2008. The well tested two zones at combined controlled rates of up to 10.2 mmscfd. The final rate was held for a period of twelve hours prior to shutting in for pressure build up. The stabilised test was completed on a 32/64 inch choke at a flowing wellhead pressure of circa 1,630 psi.
The final appraisal well drilled on the accumulation was horizontal well 42/13-5z, completed in January 2009. The well tested dry gas at a maximum rate of 26 mmscfd through an 80/64 inch choke at a flowing wellhead pressure of circa 890psi. The well was then shut in for an initial pressure build up survey after which the well was flowed for a further 59 hours at various rates to evaluate reservoir performance.
Peter Williams B.Sc. (Hons.) in Physics and EnCore’s Group Technical Manager, who has over 35 years' engineering experience in the oil exploration and production industry, has reviewed and approved the technical information contained in this announcement.
Wednesday, July 22, 2009
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