Ithaca Executes Farm-Out Agreement with Edison International and Shell
Ithaca Energy Inc. announces the execution of further UK exploration farm-out transactions. The Company has executed a farm-out agreement with a subsidiary of Edison International SpA (“Edison”) for a 25% interest in the licences containing the Handcross prospect and an agreement with Shell UK Limited (“Shell”) concerning a licence awarded in the 27th UK Offshore Licensing Round.
· As a result of the two farm-outs on the Handcross prospect, to Edison and RWE Dea, Ithaca has now reduced its share of the forecast cost of the Handcross exploration well to 6%, while retaining a 45% working interest.
· In line with its stated strategy, the Edison farm-out means that Ithaca has now substantially mitigated all committed UK exploration expenditure.
Iain McKendrick, Chief Executive Officer, commented:
“I am delighted that, not only have the farm-out team delivered very prompt and tangible results from the exploration farm-out effort, but also that we have been joined by such high quality industry partners across our UK exploration assets. The monetisation of the UK exploration portfolio has far exceeded our expectations in terms of levels of expenditure carry. Ithaca shareholders are now exposed to some potentially high impact exploration at negligible cost”.
Handcross Exploration Well Farm-Out
Ithaca has entered into an agreement with Euroil Exploration Limited, a wholly owned subsidiary of Edison, to farm-out a 25% interest in UK licences P1631 and P1832 (blocks 204/14c, 204/18b and 204/19c), which contain the Handcross prospect. This agreement reduces Ithaca’s working interest in the licences from 70% to 45%. Ithaca retains operatorship of the licences.
The Edison farm-out is in exchange for a partial carry of Ithaca’s share of the costs of an exploration well on the Handcross prospect. Edison is a major European energy company, with operations spanning the full energy supply chain, including oil and gas activities in Europe and Africa.
Handcross is a Palaeocene prospect located in the Judd Basin in the West of Shetland sector of the UK Continental Shelf. A well is to be drilled on the prospect using the Stena Carron drillship, with operations anticipated to commence in late 2013.
The Edison agreement, in combination with the previously announced farm-out agreement entered into with RWE Dea in April 2013, reduces Ithaca’s paying interest in the Handcross well to 6%. This implies a forecast net well cost to the Company of $2.5 million, compared to the net cost prior to the farm-outs of approximately $40 million.
Completion of the transaction with Edison is subject to normal regulatory and third party consents. Following completion, the Handcross partners will be Ithaca (45%, operator), Edison (25%), RWE Dea (20%) and Sussex Energy Limited (10%).
UK 27th Round Licence Farm-Out
Ithaca has also entered into an agreement with Shell to farm-out 50% of the Company’s 100% interest in UK licence P2048, covering blocks 29/24, 29/25, 29/29 and 29/30, which was awarded in the UK 27th Offshore Licensing Round. The firm licence work programme commitment is to obtain 500km2 of 3D seismic data.
The agreement provides for Shell to pay the full cost of obtaining the seismic data. Ithaca has the option to retain its 50% interest in the licence, subject to paying its corresponding share of the work programme costs on a future date. Should this option not be exercised, the Company’s 50% interest in the licence will transfer to Shell, with Ithaca having incurred no costs associated with execution of the committed work programme.
Completion of the transaction with Shell is subject to normal regulatory consents.
Press Release, June 17, 2013