Trapoil Farms-Out Working Interest of North Sea Kew Asset

Trapoil, the independent oil and gas exploration and appraisal company focused on the UK Continental Shelf region of the North Sea, announces that it has farmed out 80% of its working interest in its Kew asset to Centrica North Sea Oil Limited  (60%) and JX Nippon Exploration and Production (U.K.) Limited (20%).

As part of the Farm-out agreement, Centrica (who will assume operatorship) and JX Nippon will undertake preliminary seismic based work, following which they will, at their election, provide Trapoil with a full carry on an appraisal well designed to fully evaluate the Kew discovery. If the appraisal well proves to be successful, the P.1864 Group will seek to complete and submit a Field Development Plan to the Department of Energy and Climate Change (“DECC”).

In order to secure the Farm-out, Centrica and JX Nippon have together made a cash payment of £2.75 million to Trapoil. Following completion of the preliminary seismic-based work, should Centrica and JX Nippon elect not to drill an appraisal well and undertake the abovementioned programme, they will be required to make an additional payment to Trapoil.

The estimated carry and farm out costs that Trapoil will receive ranges from £4.75 million, should Centrica and JX Nippon elect not to drill the appraisal well, to £10 million if a positive election is made. Trapoil estimated £17 million of carried activity and farm in income would be gained following the acquisition of Reach Oil and Gas Limited. The successful farm out of Kew demonstrates the considerable value in the Reach portfolio.

Kew was awarded as a Promote Licence in DECC’s 26th Licensing Round. Trapoil acquired a 100% working interest and operatorship of Kew following the successful acquisition of Reach Oil & Gas Limited in July 2011.

Mark Groves Gidney, Chief Executive Officer of Trapoil, commented: “We are delighted to have concluded this Farm out of Kew. The opportunity to work with Centrica and JX Nippon on this exciting appraisal project means that Trapoil will be able to see Kew through to development, without the requirement for the financing of what will be expensive wells. In addition, the upfront cash payments received under the terms of the Farm-out provide the Company with additional cash resources.”

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Offshore Nieuws staff, November 25, 2011; Image: Trapoil 2011