Fastnet Oil & Gas FAST Farm-in to the "Shanagarry" licensing option

  Fastnet Oil & Gas (FAST) - Farm-in to the "Shanagarry" licensing option

RNS Number : 0536R
Fastnet Oil & Gas PLC
14 November 2012




14 November 2012

                            Fastnet Oil & Gas plc

 Farm-in to the "Shanagarry" licensing option, east of the Kinsale Gas Field

                            and Barryroe Oil Field



Fastnet Oil & Gas plc ("Fastnet" or  the "Company") (AIM: FAST, ESM: FOI)  the 
E&P company focused  on near term  exploration acreage in  the Celtic Sea  and 
Africa, is  pleased  to announcethat  it  has agreed  (subject  to  regulatory 
approval) to farm-into licensing option  12/5 ("Shanagarry" or the  "Licensing 
Option") which was recently awarded by the Minister of State at the Department
of Communications, Energy and Natural Resources (the "Department") to a  joint 
venture  group  comprising  Adriatic  Oil   Plc  (PZ:  ADOP),  Carob   Limited 
(consultants to  Fastnet)  and  Petro-Celtex Consultancy  Limited,  a  company 
established by Paul Griffiths, now Managing Director of Fastnet. The Licensing
Option area lies south  and northeast of the  undeveloped Helvick oil and  Old 
Head of Kinsale gas fields, respectively. The Licensing Option commences  from 
1 December  2012 until  31 May  2014 and  includes part-Blocks  49/18,  49/19, 
49/20, 49/23, 49/24 and 49/25 in the North Celtic Sea.



Highlights on the Licensing Option

§ Initial period  of 18 months  requiring the  re-processing of 600  km of  2D 
seismic followed  by, subject  to satisfactory  results, the  design of  a  3D 
seismic survey.

§ Potential to extend the Licensing Option by a further 18 months subject to a
satisfactory work programme being agreed with the Department

§ Fastnet to  acquire an  82.35% interest  in and  operatorship of  Shanagarry 
(subject to ministerial approval)

§ Marathon Oil Corporation ("Marathon")  mapped 120 km^2 structure within  the 
Licensing Option that was proved to be hydrocarbon-bearing after logging of  a 
gross combined oil and  gas column of approximately  500 feet in well  49/19-1 
drilled in 1984

§ The well drilled by Marathon and Enterprise Oil was not fully tested due  to 
operational issues  and poor  gas  economics as  Kinsale satisfied  the  Irish 
domestic market and no gas interconnector existed to the UK at the time



Four viable petroleum  systems were proven  by the well  results, with  offset 
field analogues.



Details of the farm-in agreements

The Licensing Option application was originally made jointly by Adriatic,  CRB 
and PCX (each as defined below) which,  prior to the execution of the  farm-in 
agreements ("Farm-in Agreements")  and the subsequent  award of the  Licensing 
Option, envisaged the following economic interests:



Holder                                   Interest
Adriatic Oil plc ("Adriatic")                 80%
Carob Limited ("CRB")                         10%
Petro-Celtex Consultancy Limited ("PCX")      10%



The terms of the Farm-in Agreements, which  are subject to the consent of  the 
Minister for the Department of  Communications, Energy and Natural  resources, 
are as follows:



Adriatic

Adriatic has agreed  with Fastnet  to farm-out 64.5%  of its  80% interest  in 
Shanagarry. Under the terms of the Farm-in Agreement, Fastnet must finance the
acquisition and processing of 200 km^2 of new 3D seismic over the area  before 
31^st December 2014.



CRB and PCX

Separately, Fastnet has agreed  to acquire an 8.925%  working interest out  of 
each of CRB's and PBX's 10% interests in the Licensing Option (representing  a 
total farm-in of 17.85%). As consideration for this working interest,  Fastnet 
has agreed to  pay all  costs and  charges relating  to both  CRB's and  PCX's 
remaining 1.075%  share in  Shanagarry up  to and  until the  date of  initial 
production of  hydrocarbons from  the first,  and if  appropriate the  second, 
petroleum accumulation within  Shanagarrythat is developed  and produced as  a 
consequence of the submission of a separate detailed plan of development.



Following execution of the Farm-in  Agreements, the holdings in the  Licensing 
Option are:



Holder   Interest
Fastnet   82.350%
Adriatic  15.500%
CRB        1.075%
PCX        1.075%



Details on Shanagarry

Shanagarry is located in the North Celtic Sea Basin east of and on trend  with 
the Kinsale Gas  Field and the  undeveloped Barryroe Oil  Field and covers  an 
area of 881 sq. km. The Licensing Option has an 18 month initial term that can
be extended by a  further 18 months subject  to a satisfactory work  programme 
being agreed with  the Department.  Should the Licensing  Option be  extended, 
Fastnet expects to acquire a minimum of 200km^2 of 3D seismic, after which  it 
may be converted into a standard exploration licence, which would involve  the 
commitment to  drill a  well. Fastnet  will operate  the Licensing  Option  on 
behalf of its partners Adriatic, CRB and PCX.



The main elements of the work programme include reprocessing of 600 km. of  2D 
seismic data; analysis of the data for the drill stem tests carried out in the
Basal Wealden and Purbeck reservoir sequences  and a regional analysis of  the 
working petroleum systems encountered in  the 49/19-1 well - Middle  Jurassic, 
Upper  Jurassic,  Basal  Wealden  and  Upper  Wealden.  The  working   capital 
requirement to Fastnet  arising in  respect of  the work  programme under  the 
Licensing Option is expected to be approximately £285,000.



Cathal Friel, Chairman of Fastnet, commented:



"We are delighted  to have concluded  this significant transaction  for a  low 
entry cost  on behalf  of Fastnet's  shareholders. The  49/19-1 structure  has 
significant areal extent  even by  industry standards.  The offshore  Atlantic 
Margin  and  has  been   proven  already  by  well   logs  from  1984  to   be 
hydrocarbon-bearing.

"This licence  application  was originally  conceived  and developed  by  Paul 
Griffiths prior to  him joining Fastnet.  Now that he  is has been  appointed 
Managing Director of Fastnet,  he will continue to  focus on delivering  value 
for our  shareholders through  de-risking the  prospect. This  transaction  is 
wholly  consistent  with  our  stated  strategy  of  targeting  prospects   of 
sufficient materiality to attract potential oil majors."



For further information, please contact:



Fastnet Oil & Gas plc              +353 (1) 644 0007

Cathal Friel, Chairman
Shore Capital                      +44 (0) 20 7408 4090

(Nominated Adviser & Joint Broker)

Nomad

Bidhi Bhoma

Edward Mansfield



Corporate Broking

Jerry Keen
Davy                               +353 (1) 679 6363

(ESM Adviser & Joint Broker)

John Frain

Brian Garrahy

Roland French


FTI Consulting                     +44 (0) 207 831 3113

Edward Westropp                    





Notes to editors



Fastnet Oil & Gas plc is an  independent oil and gas exploration company  that 
focuses on identifying early stage exploration and appraisal opportunities  in 
Offshore Ireland and  Africa. It is  quoted on  the AIM market  of the  London 
Stock Exchange and the Enterprise Securities  Market (ESM) of the Irish  Stock 
Exchange. Fastnet's aim is to assemble a portfolio of high impact conventional
oil and gas  assets that  will deliver sustainable  growth and  value for  the 
Company. Its  immediate focus  is  on implementing  its Offshore  Ireland  and 
Africa strategies where it has been awarded two offshore licensing options  in 
the Celtic Sea (Molly Malone Basin  and Mizzen Basin) and acquired a  material 
interest in the  highly prospective  Foum Assaka permit  Offshore Morocco.  In 
addition, Fastnet  will  continue  to  pursue new  conventional  oil  and  gas 
opportunities in  Africa where  the  Directors and  Advisory Board  also  have 
extensive knowledge, contacts and experience of creating value.



About the 49/19-1 Well



The 49/19-1 well was drilled in the area of the Licensing Option in 1984 by  a 
consortium that included Marathon and Enterprise Oil. The pre-drill structural
closure extended  over an  area of  120 sq.  km. with  the primary  reservoir 
target being the  basal Upper  Jurassic sands and  Middle Jurassic  limestones 
that had flow-tested at  a rate of  10,000 bopd in 1983  at Helvick (Gulf  Oil 
49/9-2 discovery well). The reservoir interval was encountered in the well and
subsequent logging demonstrated  a gross gas  column of at  least 260 feet  in 
extent. Average gas saturations of 69% were logged. The primary objective  was 
encountered deeper than prognosed with the  result that a substantial part  of 
the gas-bearing  reservoir  section  was  potentially  faulted  out  based  on 
post-well seismic interpretation. At the time no drill stem test was conducted
over this  interval  as the  domestic  market for  gas  in Ireland  was  fully 
satisfied  by  production   from  the   Kinsale  gas  field   and  no   export 
infrastructure to the UK existed. The  target for Marathon and Enterprise  Oil 
had been oil and  not gas. Subsequent  to the drilling  of 49/19-1 the  Dragon 
Field was discovered in Cardigan Bay in  the UK with gas and condensate  being 
encountered in an equivalent  reservoir section. The  potential for the  large 
49/19-1 structure  to hold  a  multi-tcf in-place  gas resource  is  therefore 
partially proven but requires the acquisition of a modern 3D seismic survey to
confirm the 2D seismic structural  interpretation and the potential  thickness 
of the faulted-out reservoir section.



The 49/19-1 structure is a large regional high across which the potential  for 
trapping hydrocarbons at shallower levels in the well has been realised by the
logging results.



The over-pressured Upper Jurassic interval  in the well encountered  excellent 
wet gas shows  on the mud  log over  a gross interval  of approximately  2,150 
feet. The interval was drilled over-balanced  with high mud weight to  control 
gas flowing into  the wellbore. Within  this interval are  hydrocarbon-bearing 
reservoir "sweet spots" that were  not tested at the  time due to issues  with 
well control and the lack of interest  in gas. These "sweet spots" are  within 
structural closure and given the size of the structure may contain significant
in-place gas resources. 3D seismic acquisition will potentially help to define
the extent  of  these  resources  by applying  new  technologies  to  map  the 
continuity of gas-charged sands.



The Purbeck and  Basal Wealden  Sand ("Barryroe  Equivalent") reservoirs  were 
encountered in the 49/19-1 well, with  a combined gross interval thickness  of 
260 feet, and were found  to be oil-bearing on  logging. Two drill stem  tests 
failed to generate flow from the  reservoirs; however an analysis of a  "skim" 
of oil from  the test string  indicated the  presence of light  oil with  only 
minor gas. Log analysis by Marathon indicated the development of porosity  and 
average oil saturations  of approximately 72%.  Log character and  individual 
sand body thicknesses are comparable to  wells drilled in the Barryroe  Field, 
particularly 48/24-3 drilled by Marathon  in 1990. Providence recently  quoted 
P50 in-place in Barryroe of 1.821 BBO with potential well deliverabilities  of 
13,300 BOE per day based on a  48/24-10z drill stem test extrapolation and  an 
assumed  development  well  concept  requiring  1,000  foot  horizontal   well 
sections.



Operational issues may have  resulted in formation  damage over the  intervals 
tested in  the 49/19-1  well .  This  will be  investigated further  with  the 
analysis of  the  drill  stem  test  data as  proposed  in  the  current  work 
programme. Mud weight had  been increased to  12 pounds per  sq. in. at  8,029 
feet in the well to control overpressuring in the Upper Jurassic and gas entry
into the well bore.  The over-balanced drilling procedures  prior to this  may 
have resulted in the  invasion of mud filtrate  into the reservoirs that  were 
tested at the Base Wealden and Purbeck as the open hole section was only cased
off (95/8" [this is 9 and 5/8  inch casing thickness] casing point) at  8,029 
feet, below the tested  interval. New 3D  seismic acquisition may  potentially 
define the  extent  of  the Basal  Wealden  reservoirs  and could  lead  to  a 
significant upgrade in the 49/19-1 in-place oil resources.



The topmost Upper Wealden section in 49/19-1 was penetrated in a  distributary 
mouth river  bar  facies over  a  gross interval  of  200 feet  and  contained 
residual oil shows. Minor C1 (methane) gas readings were also recorded on  the 
mud log  over the  interval. The  well was  not drilled  on-structure as  this 
interval was not  an objective  in the  pre-drill well  planning. The  topmost 
Upper Wealden sequence penetrated in the well is correlatable with gas-bearing
reservoirs successfully tested  by Island Oil  and Gas Plc  in 2006 and  2007, 
where the West Seven Heads, Schull and Old Head discovery and appraisal  wells 
flowed at a combined  rate of approximately 53  mm cfgpd (approximately  8,800 
BOE /day) and remain potential satellite tie-backs to the Kinsale Platform.





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