Frontier Exploration Licence 2/04
The Company currently holds a 58% working interest in FEL 2/04 with Cairn (operator) and Sosina. The licence is located in the Northern Porcupine Basin, c. 170 km off the west coast of Ireland and situated in c. 400 m water depth. The Licence is currently under discussion with the Irish regulatory authorities as to future status.
FEL 2/04 was originally awarded to the Company (80%, operator) and partner Sosina (20%) in 2004.
In 2008, the Company entered into a staged farm-in arrangement with Chrysaor E&P Ireland Limited (CEPIL) in relation to both FEL 2/04 and FEL 4/08, with CEPIL assuming an initial 30% working interest in return for carrying the costs of a 3D seismic programme, which was subsequently acquired in 2009.
In 2011, the partnership moved to the next stage of the licence with a commitment to drill an appraisal well on Spanish Point. Under the CEPIL farm-in agreement, CEPIL’s cost exposure was capped for up to two wells (or well and potential side-track).
In May 2013, CEPIL entered into a farm in agreement with Cairn Energy PLC whereby Cairn became operator with the objective to drill an appraisal/exploration well on Spanish Point. As a result, the revised working interests for FEL 2/04 and FEL 4/08 then changed to Cairn (38%), Providence (32%), CEPIL (26%) and Sosina (4%).
In July 2014, the Company announced that the planned Spanish Point appraisal well was delayed to 2015 due to rig refurbishment issues with the selected rig.
In February 2015, the Company acquired 100% of the issued share capital of CEPIL, effective from November 2014, thereby increasing the Company’s working interest to 58% in both FEL 2/04 and FEL 4/08 for a nominal consideration of US$1.
In March 2015, planned drilling activity was again deferred due to changes to the make-up of the joint venture and the consequent delay to the securing of equipment and other necessary requirements.
In 2015/2016, the Company initiated a farm-out process for part of its interests in FEL 2/04 and 4/08. Due to the challenging economic conditions and re-assessed geological interpretation, no farm-out was concluded and the JV Partners were unable to sanction drilling.
As a result, the partners (led by the operator, Cairn) engaged in discussions with the Irish regulatory authorities as to future status – these discussions are ongoing. Accordingly, due to this uncertainty on licence status, the Directors elected to impair the carrying value of the Spanish Point assets in its 2016 year-end accounts.