18 October 2013
Mediterranean Oil & Gas Plc
(the "Company" or "MOG")
Q3 Operational Update
The Board of Mediterranean Oil & Gas Plc (AIM: MOG) is pleased to announce the following operational update related to the Company's activities.
Highlights
· Acquisition of new exploration opportunity offshore Malta in July:
o 40% working interest in the Exploration Study Agreement ("ESA") for offshore Malta Area 3 (Blocks 1, 2 and 3) ("Area 3")
o Partner with Capricorn Malta Ltd (W.I. 60%, Operator), a subsidiary of Cairn Energy PLC ("Cairn")
o Located north of Malta in the Sicily Channel covering an area of approximately 6,400 km2 and containing a number of prospective leads
· Development of Aglavizza Concession progressing:
o Final investment decision on the development of Civita 1 approved
o First gas expected late 2015 at 18,000 to 20,000 scm/d net MOG
· Completion of CPR for Ombrina Mare:
o ERC Equipoise ("ERCE") have completed their CPR of the Resources at Ombrina Mare
o Contingent Resources for Ombrina Mare oil field are certified as 9.8 MMstb (1C), 25.1 MMstb (2C) and 62.8 MMstb (3C)
o Contingent Resources for Ombrina Mare gas field are certified as 3.5 Bcf (1C), 6.5 Bcf (2C) and 12.8 Bcf (3C)
o Movement from Contingent Resources to Reserves is pending approval of the Production Concession, and the finalisation of the associated Field Development Plan post completion of additional appraisal drilling
· Production challenges at Guendalina Field:
o Actions to restore full production are ongoing
o Total reserves from the field are believed to be unaffected
o Post the partial shut-in, the Guendalina Field is producing approximately 35,000 scm per day (~215 boe per day) net MOG (MOG: 20%, ENI: 80% working interest)
· Total net revenue for the year to date of €7.2 million:
o Q3 2013 net production was 5.97 MMscm, representing an average net production of 65,560 scm per day
o Q3 2013 revenue of €1.76 million, at an average price of €0.295 per scm
Outlook
· Commencement of near-term Exploration drilling activities:
o Faseto exploration well onshore Italy to spud by year-end 2013 or early 2014
o On track to spud the Hagar Qim well offshore Malta Area 4 (Blocks 4, 5, 6 & 7) ("Area 4") in Q1 2014
Dr. Bill Higgs, Chief Executive of Mediterranean Oil and Gas, commented:
"The third quarter of the year has seen excellent progress with our activities in Malta as we get closer to the drilling of the Hagar Qim 1 exploration well with our partner, Genel Energy.
Ombrina Mare is a very valuable opportunity for the Company with significant upside potential, which requires further appraisal activity in order to optimise its development. We look forward to having the opportunity to progress this project in 2014."
Exploration Activities
Onshore Italy Exploration:
Solid progress has been made in preparations to drill the Faseto exploration well, with well site preparations due to commence in November 2013. This well, operated by Gasplus (MOG W.I. 11%) is targeting 350,000 boe net to MOG in the foredeep gas play.
Plans for drilling the Santa Liberata and Masseria Sipari exploration wells are pending receipt of approval of their respective EIAs.
Offshore Malta Area 4:
The third quarter has continued to see positive progress at Area 4 offshore Malta, where we have a 25% interest in Phoenicia Energy Company Ltd ("PECL"), which holds the exploration and development rights under the Production Sharing Contract. The "Paul Romano" deep-water semi-submersible rig will drill the Hagar Qim 1 exploration well in water depths of approximately 450 metres and is targeting unrisked likely gross prospective resources in the Lower Eocene/Paleocene of 109 MMboe (27 MMboe net to MOG) at depths of approximately 2,500 metres.
AGR Well Management continues to provide drilling support services to aid in the planning and execution of the drilling activities. PECL recently awarded the logistical supply base services contract to the Maltese company Medserv Operations Limited. All equipment required for the drilling has now been procured and the logistics for the well are on track to be ready ahead of the anticipated spud date in Q1 2014.
Offshore Malta Area 3:
Following the grant of approval by the Government of Malta in July, the Company announced that it had acquired, through its wholly owned subsidiary Melita Exploration Company Limited ("Melita"), a 40% working interest in the ESA relating to Area 3 offshore Malta, as partner to Capricorn Malta Ltd (W.I. 60%, Operator), a subsidiary of Cairn.
In December 2012 Cairn entered into a two-year ESA with the Government of Malta for Area 3, which is located north of Malta in the Sicily Channel covering an area of approximately 6,400 km2 and containing a number of prospective leads. The ESA covers an initial two year period in which the partnership will conduct geological studies, the reprocessing of existing 2D seismic data, the acquisition of new 2D seismic data and limited capital works. The ESA provides the right to negotiate a production sharing contract and it can be extended to a third year to acquire 3D seismic data.
Development Activities
Aglavizza Concession:
Following the successful well test of Civita-1 announced in Q1 2013, the Company has finalised and approved the development plan for the gas field.
The development is forecast to cost around €3.1 million and will take two years to complete. The project involves the installation of separation, dehydration, compression and metering equipment at the well site as well as the installation of a 2.8km pipeline to a new entry point that will enable the gas to enter the SNAM national gas network. Work on the proposed development is underway with engineering, permitting and tendering activities.
Once on production, the field is expected to initially produce at 18,000 to 20,000 scm/d and will generate operational free cash flow of approximately €1.5 million per year for the first four years.
Ombrina Mare:
ERCE has prepared an independent assessment of the oil and gas resources of the Ombrina Mare discovery, as of 30th September 2013.
ERCE assigns Contingent oil Resources of 8.7 MMstb, 20.7 MMstb and 45 MMstb at the 1C, 2C and 3C levels to the main Oligo-Miocene reservoir, assuming water flood. In addition, ERCE assigns Contingent oil Resources of 1.1 MMStb, 4.4 MMstb and 17.8 MMstb to the underlying fractured Cretaceous reservoir. The wide range reflects the large uncertainty in reservoir efficacy at this level. At present, the Cretaceous reservoir does not form part of the Ombrina Mare development plan. The Resources are contingent on the approval of the Ombrina Mare production concession, and the completion of further work on optimising field development by MOG.
ERCE also assigns Contingent gas Resources within the Pliocene reservoirs of 3.5 bcf, 6.5 bcf and 12.8 bcf at the 1C, 2C and 3C levels of confidence. These Contingent gas Resources are contingent on the approval of the Ombrina Mare production concession, the signing of a gas sales agreement and the demonstration of a commercial gas flow rate.
ERCE notes that considerable uncertainty still exists in the reservoir distribution, especially within the oil leg, and agrees with MOG that Ombrina Mare requires further appraisal.
Production and Revenues
Production:
MOG's total net production for Q3 2013 was 5.97 MMscm (equivalent to 0.21 Bcf, or 36,325 boe). This represents average net production of 65,560 scm per day or 399 boe per day during Q3 2013. The Guendalina Field achieved net gas production (MOG 20% W.I.) of 4.69 MMscm (equivalent to 0.17 Bcf or 28,577 boe). This represents average net production of 51,575 scm per day or 314 boe per day in Q3 2013.
Production levels were down quarter-on-quarter resulting from Guendalina Field well GUE 3ss being taken offline on 30 August 2013 due to low pressure at the manifold. Post shut-in, the Guendalina Field is producing approximately 35,000 scm per day net to MOG. Investigative work, undertaken by the operator, ENI, demonstrates that the reservoir remains in good condition in terms of pressure and absence of formation water, and issues with the production performance are most likely due to the plugging of the well completion. The operator is evaluating additional remedial operations to restore the production.
In Q3 2013, the Company's onshore Italy gas fields achieved net production of 1.273 MMscm (equivalent to 44.9 MMscf or 7,749 boe). This represents average net production to the Company of 13,984 scm per day or 85 boe per day in Q3 2013.
Revenues:
MOG's total revenue for Q3 2013 was €1.76 million, representing an average realised price of €0.295 per scm. Total revenue for the year to date (end Q3) was €7.2 million. In this period, net revenue from the offshore Guendalina Field was €6.0 million and €1.2 million for the onshore Italy gas fields.
QUALIFIED PERSON
In accordance with the guidelines of the AIM Market of the London Stock Exchange, Dr Bill Higgs, Chief Executive Officer of Mediterranean Oil & Gas Plc, a geologist, explorationist and reservoir manager with over 24 years oil & gas industry experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies, who has reviewed and approved the technical information contained in this announcement.
ENQUIRIES:
|
Mediterranean Oil & Gas Plc
www.medoilgas.com
Bill Higgs, Chief Executive/Chris Kelsall, Finance Director
|
Tel: +44 (0)203 178 5807
|
|
Liberum Capital Limited (Nominated Adviser and Joint Broker)
Clayton Bush/Ryan de Franck/Tim Graham
|
Tel: +44 (0)20 3100 2222
|
|
RBC Capital Markets (Joint Broker)
Matthew Coakes/Jeremy Low /Jonny Hardy
|
Tel: +44 (0)207 653 4000
|
|
FTI Consulting (Public Relations)
Ben Brewerton/Alex Beagley/Georgia Mann
|
Tel: +44 (0)207 831 3113
|
Glossary
· Bcf: Billion standard cubic feet
· boe Stock tank barrels of oil equivalent
· MMboe Million stock tank barrels of oil equivalent
· MMscf: Million standard cublic feet
· MMscm: Million standard cubic meters
· MMstb Million stock tank barrels of oil
· scf: Standard cubic feet
· scm: Standard cubic meter