Trapoil Gets New Licences in North Sea

Trapoil, the independent oil and gas exploration and appraisal company focused on the UK Continental Shelf (“UKCS”) region of the North Sea,announces that it has been formally awarded Blocks 12/26b and 12/27 containing the Niobe prospect and Block 44/18c containing the North Kelvin prospect (together, the “New Licences”).

The New Licences were awarded to Trapoil on 30th December 2011 further to the Department of Energy and Climate Change’s (“DECC’s”) 26th Licensing Round and completion of DECC’s environmental assessments. The Niobe prospect blocks are located in the West Bank Graben of the Inner Moray Firth area of the UK North Sea and comprise a total licence area of 417km2, while the North Kelvin part block is located in the Silverpit Basin of the Southern North Sea and comprises a total licence area of 142 km2.

Trapoil’s joint venture partners in Niobe which is a Traditional licence award, with an initial four year term, are Norwegian Energy Company UK Limited and Suncor Energy UK Ltd which is also the operator. Trapoil is participating with a wholly carried 10 per cent. interest and has negotiated with Suncor Energy UK Ltd an option to acquire an additional 20 per cent. paid working interest in the licence. Trapoil and its JV partners have committed to drill a well to test the Niobe prospect, which is mapped as stratigraphic pinch-out up dip of well 12/27a-3 that encountered hydrocarbons within sands of Late Jurassic age and is estimated as having a potential best estimate gross prospective resource of 51 million barrels of oil.

Trapoil’s joint venture partner in the North Kelvin Promote licence award is Vectis Petroleum Limited. Trapoil is operating with a 50 per cent. working interest in this licence. The part block is believed to contain an extension to the Kelvin field (North Kelvin), which is mapped as a structural closure at Base Permian level and is estimated as having a potential best estimate gross prospective resource of 235 billion cubic feet of gas. The planned work programme will focus on seismic reprocessing to reduce uncertainty in the depth mapping of the structure and will be followed by a drill-or-drop decision within the next two years.

 Lacewing

Trapoil has sold, subject to DECC and partner approval, its 10 per cent. working interest in its Lacewing asset (P.1181, Block 23/22b) (“Lacewing”) to ConocoPhillips (U.K.) Limited (“ConocoPhillips”) for a consideration of £1 million (the “Consideration”) to be satisfied in cash on completion of the disposal, which is anticipated to be in approximately one month’s time.

Trapoil acquired its 10 per cent. working interest in Lacewing, (which was awarded as a Traditional Licence in the 22nd Licensing Round), following on from the Company’s successful acquisition of Reach Oil & Gas Limited in July 2011.

Block 23/22b is located on the Eastern flank of the Central Graben and contains the Corrie Jurassic oil discovery and the Triassic high temperature high pressure (“HTHP”) Lacewing prospect which is scheduled to be drilled in 2012.

In the light of Trapoil’s relatively small working interest and the high cost and our imminent exposure to long lead items associated with an HTHP drilling programme, management has taken the view that the Company’s resources can provide shareholders with greater returns by deployment on other more cost effective opportunities. Following the sale of Lacewing the Company will have no working interests in any potential HTHP wells.

The Consideration will be applied to fulfilling the Company’s stated strategy of enhancing its existing asset base and to accumulate, both organically and through acquisitions, a significant portfolio of oil and gas exploration, appraisal and production assets/prospects in the UKCS region of the North Sea.

 Drilling Programme in 2012

With respect to the Company’s 2012 drilling programme, which management believes to be amongst the most active in the UKCS region of the North Sea, the Company is pleased to advise that its operating partners are successfully contracting rigs. Of the seven proposed wells (excluding Lacewing), three rig slots have been contracted with a fourth expected to be secured by mid January. A number of the wells have very significant upside potential both for Trapoil and its licence partners.

Orchid (Licence P.1556, Block 29/1c)

The Sedco 711 semi-submersible rig has been contracted to drill the Orchid exploration well with an anticipated spud date now in February. This well was initially delayed by weather affecting the transit of the rig from Ireland and has been further delayed during its current operations for another operator by the various recent storms in the North Sea.

Magnolia (Licence P.1610, Block 13/23a)

The Ocean Nomad semi-submersible rig has been lined up to drill an exploration well on the Magnolia prospect or a nearby feature and this could be as early as May.

Romeo (Licence P.1666, Block 30/11c)

The WilHunter semi-submersible rig has been contracted to drill the Romeo prospect with an anticipated spud in Q3.

Planning is underway to secure a jack up rig by the end of Q1 to drill both the Knockinnon (Licence P.1270, Block 11/24) and Burrigill (Licence P.1270, Block 11/24) assets towards the end of the year. A semi-submersible rig is also being tendered to drill the Scotney (Licence P.1658, Block 20/5b) asset with a likely spud date in Q3. Negotiations are underway to contract the Ocean Nomad rig to drill the Crazy Horse (Licence P.1650, Block 14/13) asset with an anticipated September spud date.

Of the above wells due to be drilled in our 2012 programme, with the exception of Orchid and Crazy Horse, Trapoil is wholly carried through the exploration well and any resulting appraisal wells and development costs through to first oil. With regard to Orchid, Trapoil has both a 5 per cent. carried interest and a 10 per cent. working interest. With regard to Crazy Horse, Trapoil has a 5 per cent. carried interest and a 17 per cent. working interest. All wells, with the exception of Romeo are anticipated to be at normal temperature and pressure subsurface conditions. Romeo subsurface conditions are believed to be borderline HTHP and as such, the well will be drilled as an HTHP well. However, Trapoil is fully carried in this well until first oil is produced.

Mark Groves Gidney, Chief Executive Officer of Trapoil, commented:

“We are delighted to have been formally awarded the 26th Round licences which marks another step in the expansion and strengthening of ourexploration portfolio. We look forward to preparing for the well to test the Niobe prospect with our JV partners and to operating the North Kelvin block with seismic reprocessing being the first part of the work programme.

 Selling Lacewing is part of our strategic portfolio management: this HTHP exploration well is expensive, at close to £40 million, and a successful well is likely to result in several appraisal wells before submission of a Field Development Plan to DECC. We have sold to ConocoPhillips in the belief they will become the new operator, and as such have agreed to what we consider to be a fair price and to avoid the substantial and imminent costs we would have otherwise incurred from retaining the paying interest.

 The proceeds from the sale of Lacewing will provide funds that may be deployed in a number of opportunities under consideration to allow us to maintain our goal of drilling eight wells a year. We are encouraged that the various operating partners are progressing to secure rigs for the current well programme in 2012.”

Martin David, Technical Director of the Company, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person under the AIM Rules. Mr David holds a BSc degree in Geology from the University of London and has over 37 years’ experience in the oil industry.

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Offshore Nieuws Staff , January 9, 2012