[attach id=363058 size="medium"]Rockhopper’s £29m acquisition of Mediterranean Oil and Gas gave a foothold in the Mediterranean.[/attach]
Phoenicia Energy Company was granted a six-month extension until January 2015 in order to conclude testing on the findings of the Ħaġar Qim well. The well was abandoned in July because no reservoir was found.
The extension was confirmed by Genel, which holds 75 per cent of the shares in Phoenicia, on its website. Sources familiar with the sector said that this would mean around €500,000 more would have to be paid to the government.
Phoenicia asked for the extension before the well was abandoned as the first phase of the concession was due to expire on July 18 and it was clear that more time would be needed to analyse the results.
The consortium has not yet given any indication as to whether it will take up the option to go into a second phase – in line with its concession agreement – and drill a second well. The sources estimated that the first phase would cost around $45 million in all (€35 million).
There will be considerable analysis of the results – and calibration against all the seismic data gathered before drilling – before anyone decides on whether to try again
“Clearly, frontier drilling is always very risky but the decision to proceed is based on carefully-gathered scientific data. However, the decision-makers have to justify their decision to drill to the board of directors. So there will be considerable analysis of the results – and calibration against all the seismic data gathered before drilling – before anyone decides on whether to try again,” the sources said.
Phoenicia Energy Company is the operator of the Area 4 licence and a wholly-owned subsidiary of Genel Energy plc, the majority shareholder in the consortium holding the licence for exploratory drilling in the area.
Since drilling began, the minority shareholder, Mediterranean Oil and Gas, was sold outright to Rockhopper, which has a balance sheet of $247 million cash and no debt. Through the £29 million acquisition, Rockhopper took over MOG’s interests in Malta, Italy and France, its first foothold in the Mediterranean.
The government is currently carrying out due diligence on Rockhopper, prior to giving its consent to the indirect change of control of the concession from Melita Exploration Co. Ltd – a subsidiary of MOG.
A spokesman for Rockhopper said the transaction provided them with a footprint in the Great Mediterranean and North African region which it could build up with time. He said the company was conducting a formal review of all of the acquired licences which will incorporate a comprehensive review of the Malta concession(s) and the results of the well in Area 4. Rockhopper will be meeting the Genel technical teams during the course of the well evaluation.
Rockhopper also holds a 40 per cent interest during the Exploration Study Phase in area 3 with Cairn Energy as operator.
Exploratory drilling in Area 4 started in May and was planned to last 45-55 days. Sources said that the duration estimate was always designed to take worst case scenarios into account and the earlier than expected results were due to efficient operations. Tony Hayward, CEO of Genel Energy, had predicted a one-in-five chance of finding oil, adding that the odds could be twice that.
However, it was apparent immediately from the cuttings brought the surface that there were no hydrocarbons. The sources said this was clearly a huge disappointment for all involved – and will also deter other investors from coming forward should Phoenicia decide not to proceed to the second phase.
“We have to put this setback into context though. Malta was represented at the main oil conference in Amsterdam earlier this summer, which was attended by around 7,000. And as a result, there were a handful of promising data room requests by interested investors. And there is still the two-year concession held by Cairn Energy, which is evaluating its seismic data. They have until June 2015 to decide whether to enter into a production sharing agreement.
“Despite the results of this well, there are still many other prospects for Malta,” the sources concluded.