Placing and Admission on AIM
Lansdowne Oil & Gas plc
21 April 2006
Lansdowne Oil & Gas plc
('Lansdowne', 'the Company' and the 'Group')
Placing and Admission to trading on AIM
Lansdowne Oil & Gas plc is an oil and gas exploration company which holds one
Frontier Exploration Licence in the Donegal Basin and four Celtic Sea Licensing
Options, covering a total of more than half a million acres offshore Ireland.
In February 2006, the Company completed a private placing which raised
approximately £750,000 to provide working capital for the Group.
Earlier today the issued share capital of Lansdowne was admitted to trading on
the AIM market in conjunction with a placing of 1,882,353 shares at an issue
price of 85p which raised £1.6 million before expenses. At the placing price,
Lansdowne has a market capitalisation of £17.7 million.
Key points
• Lansdowne was formed in December 2005 to acquire Ramco Energy plc's
('Ramco') Irish exploration portfolio.
• Lansdowne's strategy is to become an exploration / appraisal promoter
focussing on shallow water - low cost high value opportunities, identifying and
working up opportunities and then farming them out to achieve a carry through
the drilling/project phase.
• The Company will generally seek to retain 15-30% non-operator stakes
in its assets.
• Lansdowne's assets comprise:
- one frontier exploration licence in the Donegal Basin including the Inishbeg
and Inishtrahull prospects (19.25%)
- Four Celtic Sea Licensing options: Midleton (100%), Rosscarbery (77%), East
Kinsale (100%) & Seven Heads Oil (74% - reducing to 29.6% subject to farm-out
programme). The Celtic Sea licensing options were recently extended to 31
December 2006.
• Lundin, the Operator of the Donegal Licence, has commenced well
planning work for the drilling of the Inishbeg well, which is expected to start
in Q2 2006. This well will be drilled by the Petrolia rig, which it was
announced this week has commenced mobilisation to the Irish sector to commence a
three well drilling programme. Lansdowne are carried through the drilling and
testing of the Donegal exploration well.
• Following the Placing the Company will have approximately £1.75
million net cash, which will be utilised to conclude the technical work up the
Celtic Sea assets and for working capital purposes generally.
• The Group will also seek to identify and exploit new exploration and
appraisal opportunities in the Irish and UK Continental shelves.
• On Admission Ramco, through its subsidiaries, is interested in an
aggregate of 17,953,308 Ordinary Shares representing 86% of Lansdowne.
• John East & Partners Limited has been appointed as Nominated Adviser
and Broker to the Company.
John Greenall, Non Executive Chairman, commented:
'Lansdowne was specifically set up to exploit the potential and demand that is
present in the Irish market. We have an exciting portfolio of assets with an
extensive work programme over the next two years.
Our team is highly motivated and has in depth knowledge, built up over a number
of years, of the Irish continental shelf. Our Admission to AIM will provide
Lansdowne with the ability to move to the next stage of its development and take
full advantage of the opportunities available to us. '
21 April 2006
Enquiries:
Lansdowne Oil & Gas
Stephen Boldy, Chief Executive 01224 352200
Chris Moar, Finance Director
College Hill 020 7457 2020
Paddy Blewer
Ben Brewerton
John East & Partners Limited 020 7628 2200
Johnny Townsend
David Worlidge
Website. www.lansdowneoilandgas.com
Lansdowne's Assets
The Group has a gas prospects in Donegal and three gas prospects and one oil
prospect in the Celtic Sea as follows:
Donegal
Inishbeg and Inishtrahull (Non-Operator - 19.25 per cent. interest carried
through exploration well)
The Donegal acreage lies around 70 km off the Northwest coast of Ireland,
offshore County Donegal, in water depths of less than 125 metres. This acreage
was originally awarded as a Licensing Option in 2000 and this has now been
replaced by the Donegal Licence which is valid until 19 January 2020, unless
surrendered or revoked before that time. As part of the transition to a full
exploration licence, operatorship was transferred from Ramco to Lundin and a
farm-out agreement was put in place, pursuant to which all of the Group's costs
associated with the drilling and testing of an exploration well to test the
hydrocarbon potential of the Inishbeg prospect are to be carried by subsidiaries
of Island Oil and Gas plc and Petroceltic International plc. Further details of
this farm-out agreement are set out in the section below headed 'Farmout
arrangements'. Under the terms of the Donegal Licence, the Inishbeg well is
required to be drilled by 20 January 2007 and Lundin, the Operator of the
Donegal Licence, has commenced well planning work for the drilling of the
Inishbeg well which is expected to commence drilling in June 2006.
Inishbeg Prospect
Current mapping has identified a large four-way dip closed anticline at Sherwood
Sandstone level named Inishbeg.
In its valuation report (as set out in the Company's Admission document) Scott
Pickford has assigned an overall chance of success of 12.5 per cent. for the
Inishbeg prospect, with the trap being considered robust, but risk remaining in
the source, reservoir and seal components.
The economic evaluation of the Inishbeg prospect contained in the Scott Pickford
Report, modelled a development scenario utilising two platforms, each with 12
production wells producing dry gas, piped to shore to a receiving production
station with compression facilities and from there entering the gas grid. The
first gas production was assumed to flow on 1 January 2011 and a gas sales price
of 30p/therm was used.
The Scott Pickford Report's P50 case for the Inishbeg prospect indicates
recovery of 873 bcf reserves (168 bcf net to Lansdowne) and using a 15 per cent.
discount rate delivers a positive NPV of $472 million ($93 million net to
Lansdowne) and an EMV net to Lansdowne of $11.6 million.
Inishtrahull Prospect
There are additional opportunities present on the Donegal Licence acreage - the
Inishtrahull prospect and a lead in the West of the acreage, both of which have
been mapped at the Triassic Sherwood Sandstone level.
The evaluation of the Inishtrahull prospect contained in the Scott Pickford
Report concluded that the chance of success was 12.5 per cent. as the risks are
essentially the same as for the Inishbeg prospect.
The economic modelling adopted in the Scott Pickford Report is similar to that
which was used for the Inishbeg prospect, but based upon a stand alone
development for Inishtrahull. First gas flow was assumed to take place on 1
January 2012 and a gas sales price of 30p/therm was used.
The Scott Pickford Report's P50 case for the Inishtrahull prospect indicates
recovery of 356 bcf (68.5 bcf net to Lansdowne) and using a 15 per cent.
discount rate this delivers a positive NPV of $134 million ($25.9 million net to
Lansdowne) and an EMV net to Lansdowne of $1.6 million.
Celtic Sea
The Group holds four assets in the Celtic Sea, lying in water depths of
generally less than 100 metres. This portfolio has been built up with the
overall strategic objective of identifying gas prospects, which if successful,
could be produced through a tie-back into the existing Seven Heads and Kinsale
infrastructure, subject to access rights being agreed. Three of the assets are
considered as gas plays - the Midleton Licensing Option, the Rosscarbery
Licensing Option and the East Kinsale Licensing Option.
The proximity of the existing infrastructure means that even a modest gas
discovery (c20 bcf - see East Kinsale analysis) in the area could be
commercially viable. The Ballycotton field (c55bcf) was put into production in
1991 when gas prices were significantly lower than the present day.
In addition the Group holds the Seven Heads Oil Licensing Option over the deeper
cretaceous Wealden oil bearing reservoirs (restricted to a depth below
approximately 1,250m (4,000 feet) sub-sea) in the Seven Heads acreage.
Midleton (Operator - 100 per cent. interest)
The Group's Midleton acreage comprises the southern parts of Blocks 49/11 and 49
/12 and lies approximately 20 km Northeast of the Kinsale Head and Ballycotton
gas fields, in water depths of less than 100 metres.
The prospectivity of the southern parts of Blocks 49/11 and 12 was highlighted
to Ramco by
Marathon who had mapped out a substantial structure. Following in-house
evaluation by Ramco, an application was submitted and the Midleton Licensing
Option was awarded on 25 February 2003 for 18 months from 1 February 2003 to 31
July 2004. Subsequently, the Midleton Licensing Option has been extended to 31
December 2006.
The producing reservoir in the Ballycotton field is the Cretaceous Greensand, or
A Sand, which is also the case for the main reservoir in the Kinsale Head gas
field. The Greensand is also the prime reservoir target in the Midleton
concession and has been established to be present with good reservoir quality by
the 49/11-1 and 49/11-2 wells. During 2003 an experimental shallow seismic
programme was carried out to improve imaging at shallow depths. Mapping of this
new data and integration with previously acquired data has led to the
identification of a number of promising structures, one of which (the Midleton
prospect) has been selected for working up for drilling. A seismic reprocessing
project is planned to finalise the details of the trap and to assist in locating
an exploration well. All the structures within the Midleton concession are
within sub-sea tie-back range of existing facilities.
Source, reservoir and trap are all considered by Lansdowne to be low risk
elements of the Midleton prospect, with the key risk remaining being the sealing
capacity of the northern bounding fault. The Scott Pickford evaluation reached
similar conclusions and rated the overall chance of success as 32 per cent.
The development concept used by Scott Pickford proposes a single vertical
sub-sea producer tied back to the Ballycotton gas field, some 20 km from the
Midleton prospect, from where the gas would be piped to the Kinsale Head gas
field which has compression facilities. The first gas production was assumed to
flow on 1 October 2008 and a gas sales price of 30p/therm was used.
The Scott Pickford Report's P50 case for the Midleton prospect indicates
recovery of 44 bcf
prospective resources (44 bcf net to Lansdowne) and using a 15 per cent.
discount rate delivers a positive NPV of $56 million for Lansdowne and an EMV
net to Lansdowne of $9.8 million.
Rosscarbery (Operator - 77 per cent. interest)
The Rosscarbery acreage lies immediately North of the Seven Heads gas field in
water depths of less than 100 metres. The Rosscarbery Licensing Option was
granted on 17 September 2003, for a period of one year from 15 September 2003.
Subsequently, the Rosscarbery Licensing Option has been extended to 31 December
2006.
The Galley Head discovery well (48/18-1), lying in the Northeast part of the
Rosscarbery Licensing Option acreage and drilled by BP in 1985, tested gas at
13.7 mmscfd from the Lower Cretaceous Greensand reservoir. In post-well
evaluation studies, BP identified a number of other structures, with the main
prospect being what is now called Rosscarbery.
Since award of the Rosscarbery Licensing Option, a re-mapping of the Rosscarbery
prospect exercise conducted by Ramco has confirmed its potential. Rosscarbery is
a well defined structure with closure to the South formed by a large down to the
basin (South) fault that will juxtapose 'A' sands with chalk and dip closure is
mapped to the West, North and East. Should the fault throw remain consistent
then the Wealden Sands are more likely to be juxtaposed against the Gault Clay.
Fluid factor processing indicates a better chance for gas in the Wealden than in
the 'A' sand. Scott Pickford has assigned a chance of success of 19 per cent.
for the 'A' sands and 35 per cent. for the Wealden Sands. AVO studies are
planned to look for anomalies that could be Direct Hydrocarbon Indicators. The
Rosscarbery prospect is within sub-sea tie-back range of existing facilities.
For economic evaluation purposes, the Scott Pickford Report has modelled success
solely at the Wealden sands level given it has the greater chance of success,
with three sub-sea vertical production wells recovering 86 bcf, (66 bcf net to
Lansdowne) on a P50 basis tied back to the Seven Heads gas field, some 25 km
away, from where it would be piped to the Kinsale Head gas field which has
compression facilities.
The Scott Pickford Report assumes a 1 October 2008 first gas date for the
Rosscarbery prospect and an average selling price of 30p/therm which with a
discount of 15 per cent., yields a positive NPV of $76.2 net to Lansdowne and an
EMV of $20.9 million net to Lansdowne.
East Kinsale (Operator - 100 per cent. interest)
The East Kinsale acreage lies some 20 km to the East of the Kinsale Head gas
field. The East Kinsale Licensing Option was granted on 19 November 2003 for a
period of two years from 24 November 2003 and requires completion of a specified
work programme. Subsequently, the East Kinsale Licensing Option has been
extended to 31 December 2006.
Work carried out to date by Ramco has consisted of mapping the available 2D
seismic data, which has identified a number of leads. A seismic reprocessing
project is planned to improve existing reservoir imaging. The East Kinsale
acreage is within sub-sea tie-back range of the Kinsale Head gas field.
The key prospect in the East Kinsale acreage considered by Scott Pickford was at
lower Cretaceous level (49/17-W) lying to the East of the Kinsale Head gas field
and to the South, and updip of, the 49/17-1 exploration well.
Prospect 49/17W was evaluated by Scott Pickford, with the main risk identified
being trap configuration given the low relief of the structure, which assessed
the overall chance of success as being 20 per cent.
For economic evaluation purposes, Scott Pickford assumed a single vertical
sub-sea well tied back to the Kinsale Head gas field, some 20 km away, yielding
21.5 bcf prospective resources (20.5 bcf net to Lansdowne) on a P50 basis.
The Scott Pickford Report assumes a 1 October 2008 first gas date for block 49/
17W and an average selling price of 30p/therm, which with a discount of 15 per
cent., yields a positive NPV of $24.2 million ($23.0 million net to Lansdowne)
but the EMV is negative.
Seven Heads Oil (Operator - 74 per cent. interest, reducing to 29.6 per cent.
pursuant to a farm-out option)
The Seven Heads Oil Licensing Option acreage lies beneath the Seven Heads gas
field, with the boundary between the two concessions lying at approximately
1,250m sub-sea. The Seven Heads Oil Licensing Option was granted on 17 September
2003 for 12 months from 15 September 2003. Ramco's interest in the Seven Heads
Oil Licensing Option was acquired by Lansdowne Celtic on 13 February 2006.
Subsequently, the Seven Heads Oil Licensing Option has been extended to 31
December 2006.
Within the Seven Heads Oil Licensing Option acreage, oil was successfully tested
from three of the exploration or appraisal wells which achieved flow rates of
between 1,300 and 1,600 bopd. The reservoir sands are in the Cretaceous Middle
and Lower Wealden sequences from 1,400 to 2,300 metres below sea level. The oil
is light (39 to 42 degrees API) but contains relatively high wax contents
ranging from 12 per cent. to 22 per cent. wax, which could require treatment to
avoid production difficulties.
The two main risks with the Seven Heads Oil prospect are the reservoir
continuity risk and the high pour point of the oil. The base case development
plan aims to alleviate the reservoir continuity risk through a phased
development using wells tied-back to a wellhead production platform and then
transferring the oil to a leased FPSO.
All the estimated recoverable oil and gas volumes from the Seven Heads Oil
prospect are considered to be in the contingent resources category.
The base case development plan results in the recovery of 23 mmbbls net to
Lansdowne and assumes a 1 January 2009 first oil date, with an average selling
price of $35/barrel. Scott Pickford estimate that this results in a positive NPV
of $71.9 million net to Lansdowne (on the basis of a 29.6 per cent. Lansdowne
interest).
A farm-out has been granted in relation to the Seven Heads Oil Licensing Option
which, if effected, would leave the Group with a 29.6 per cent. interest in the
Seven Heads Oil Licensing Option. Further details of this farm-out option are
set out in the section below headed 'Farm-out arrangements'.
Farm-out arrangements
Farm-out arrangements are already in place in relation to two of the Group's
licences:
(a) Donegal Licence - a farm-out agreement was entered into in January 2005
pursuant to which all of the Group's share of the costs associated with the
drilling of an exploration well to test the hydrocarbon potential of the
Inishbeg prospect are to be carried by Island Donegal Limited and Petroceltic
Erris Limited both being subsidiaries of Island Oil and Gas plc (Island) and
Petroceltic International plc respectively, with the Group retaining a 19.25 per
cent. interest in the Donegal Licence; and
(b) Seven Heads Oil Licensing Option - in April 2004 a farm-out option was
granted by ROGL in favour of Island, pursuant to which Island agreed to act as
technical manager and to fund ROGL's share (now Lansdowne Celtic's share) of the
licensing option rentals and the work programme relating to the Seven Heads Oil
Licensing Option, in exchange for which Island was granted an exclusive option
to farm in to 60 per cent. of the Group's interest in any successor or
subsequent authorisations to the Seven Heads Oil Licensing Option covering all
or part of the same area. In order to exercise this option, Island is required
to fully fund Lansdowne Celtic's share of the cost of the drilling and testing
of an exploratory well on the Seven Heads Oil prospect (at a location and to a
depth mutually agreed between Island and Lansdowne Celtic). If Island exercise
the foregoing option, and assuming the interests of the current holders of the
Seven Heads Oil Licensing Option remain the same, Lansdowne Celtic will transfer
to Island a 44.4 per cent. interest in the Seven Heads Oil Licensing Option,
which would result in the Group's interest in the Seven Heads Oil Licensing
Option being reduced from 74 per cent. to 29.6 per cent.
The Group is in the process of seeking farm-out partners for the Midleton,
Rosscarbery and East Kinsale Licensing Options with a view to retaining a 15 to
30 per cent. non-operator interest post farm-out. Presentations have been made
to a number of interested parties who have entered into confidentiality
agreements and following dataroom visits, detailed evaluations are continuing.
It is planned that this farm-out process will be concluded during 2006 and that,
if supported by further technical work and farm-out arrangements are put in
place, applications will be submitted to the PAD to convert all or part of the
areas covered by the Midleton, Rosscarbery and East Kinsale Licensing Options
into Exploration Licences, with the likelihood that wells will be committed for
drilling within the first two years of such Exploration Licences, during 2007
and/or 2008.
The Group's Assets
Gas Prospective Resources
Lansdowne Chance of Gross bcf Net to Lansdowne NPV15 Lansdowne EMV15
Interest success Lansdowne bcf $'m $' m
Prospect
Inishbeg 19.25 per cent. 12.5 per cent. 873 168 93 11.6
Inishtrahull 19.25 per cent. 12.5 per cent. 356 68 26 1.6
Donegal Total 1,229 236 119 13.2
Rosscarbery 77 per cent. 35 per cent. 86 66 76 20.9
(Wealden)
Midleton 100 per cent. 32 per cent. 44 44 56 9.8
East Kinsale 100 per cent. 20 per cent. 22 21 23 0
Celtic Sea Total 152 131 155 30.7
Total 1,381 367* 274 43.9
Lansdowne Gross mmstb Net to Lansdowne
Interest Lansdowne NPV15
mmstb $'m
Prospect
Seven Heads Oil 29.6 per cent. (Currently 74 79 23 72
per cent. Reducing to 29.6 per
cent. If farm-out programme
including drilling well
completed)
TOTAL GAS AND OIL 346
*this is equivalent to approximately 61 mmboe
Note: The information set out in the above table relaying to changes of success,
gross estimated contingent and prospective resources, indicative NPVs and EMVs
has been extracted form the Scott Pickford report set out in the admission
document. Accordingly, the above table should be read in conjunction with such
report. The NPV and EMV of the Group's interests, as reported by Scott Pickford
in such report, uses a discount factor of 15 per cent. per annum.
Ireland
Demand for natural gas in Ireland has displayed strong growth in recent years.
The contribution of natural gas to Ireland's Total Primary Energy Requirement
grew from zero in 1978 to 25 per cent. in 2004 and government forecasts predict
that this figure could be around 35 per cent. by 2010. In addition, indigenous
gas supplies are not adequate to satisfy the Irish demand at the current time.
Consequently, Ireland is heavily dependent on gas imports from the UK. This high
level of dependence has made the security of supply a key policy issue for the
Government and has brought into focus the importance of more rapid development
of indigenous energy sources such as oil and gas.
Directors
John Greenall (Non-Executive Chairman), aged 66, joined RC Greig & Co in Glasgow
in 1960 becoming a partner in 1965. He assisted in the formation and subsequent
fund raising of London and Scottish Marine Oil (LASMO) and Clyde Petroleum. Mr
Greenall was instrumental in creating Greig Middleton through the merger of RC
Greig and WN Middleton in 1983. He joined The Stock Exchange Council in 1985 and
served on the Board of its Successor - The Securities Association.
In 1994 he joined HCIB (a subsidiary of Guinness Mahon ('GM')) as director of
Corporate Broking. When GM was taken over by Investec in 1998 he headed up the
corporate broking team at that bank One of HCIB's specialist research areas was
the Exploration & Production sector and he oversaw a number of flotations in the
sector - the most recent being Venture Production before he retired in 2002.
He is a non-executive director of The Sanctuary Group plc and RP&C International
Limited a niche investment bank based in London.
Dr Stephen Boldy (Chief Executive Officer), aged 50, joined Ramco in March 2003.
From 1980 to 1984 Dr Boldy worked as a petroleum geologist for the Petroleum
Affairs Division of the Department of Energy in Dublin and then spent almost 19
years with Amerada Hess Corporation, where his appointments included U.K.
Exploration Manager and International Exploration Manager. Dr Boldy has
extensive experience of working Irish offshore basins and the basins West of
Britain and earned his Ph.D in geology from Trinity College Dublin.
Christopher Moar (Finance Director and Company Secretary), aged 43, joined Ramco
in 1993 and was appointed Company Secretary in December 1996. Prior to this he
was a planning and financial accountant for Baker Oil Tools (United Kingdom)
Limited. Mr Moar has an MA degree in Accountancy from Aberdeen University and
qualified as a Chartered Accountant with Arthur Young in 1987. Following
Admission, Mr Moar will remain employed by Ramco as Vice President-Finance and
Company Secretary but will be responsible for the finance function in Lansdowne
as one of the services provided by Ramco under the Ramco Services Agreement.
Steven Bertram (Non-Executive Director), aged 46, is Managing Director of Ramco
and has been with Ramco since 1986. He was appointed to the Ramco board as
Finance Director in 1991 and is now Managing Director of Ramco, having been
appointed to that position in June 2005. Mr Bertram has a background in oil and
oil services companies gained through his time with Ramco and during his
chartered accountancy training contracts. He has been involved with Ramco from
the company's original USM listing through its move to AIM and its international
offer and listing on the American Stock Exchange. Mr Bertram has an MA Honours
degree in Economics with Accountancy from Aberdeen University and qualified as a
Chartered Accountant with Arthur Young in 1984.
Viscount Torrington (Non-Executive Director), aged 62, graduated from Oxford
University as a geologist in 1964. He served in technical and managerial roles
with Anglo American plc and Lonrho plc. In 1975, he became managing director of
the Attock Oil Company, later Anvil Petroleum plc. The latter was merged with
Berkeley Exploration in 1986, and acquired by Ranger Oil the same year. In 1987,
he became a Director of Flextech plc and chief executive of Exploration &
Production Services (Holdings) Limited, better known as Expro, a major UK
oilfield services contractor. In 1995, he became Managing Director of Heritage
Oil & Gas Limited, later listed in Toronto as Heritage Oil Corporation.
Viscount Torrington has held non-executive appointments in several companies and
is currently chairman of CYC Holdings plc, a company admitted to trading on AIM,
which facilitates Chinese entities wishing to list their shares in London. He is
also a non-executive director of a private Canadian oil and gas exploration and
production company involved in West Africa.
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