Island Oil & Gas completes farmouts off Ireland

April 12, 2007
Island Oil & Gas PLC, Dublin, has concluded separate farmout agreements for two licenses off Ireland.

By OGJ editors
HOUSTON, Apr. 12 -- Island Oil & Gas PLC, Dublin, has concluded separate farmout agreements for two licenses off Ireland.

In one agreement, Island will farm out a 20% interest in Old Head of Kinsale gas field to Valhalla Oil & Gas Ltd. The field lies on exploration license 4/05 in the Celtic Sea.

Valhalla will pay £2 million plus a 7.5% royalty, which will be determined by various factors including field performance. Valhalla also will participate pro-rata in the 49/23-2 appraisal well, which a Petrolia Drilling Ltd. semisubmersible will spud in May.

Assuming a successful test, the partners may complete and tie back both the 49/23-2 well and the 49/23-1 well (drilled in 2006) to the Kinsale platform in 2008. Production from the field is expected to start in fourth-quarter 2008.

Island will retain 80% interest in Old Head of Kinsale field.

In the second agreement, Horizon Energy Partners subsidiary Oyster Energy was awarded the option to farm in to Frontier Exploration License 1/04 in the Porcupine basin on the Atlantic Margin, 150 km off western Ireland.

Oyster has the exclusive option to acquire a 10% interest in the block for an undisclosed cash consideration. The option must be exercised prior to Aug. 31, 2007, Island said.

This deal would reduce Island's equity to 55.35% from 61.5% and Valhalla's equity to 34.65% from 38.5%.

Frontier Exploration License 1/04 covers Block 26/28 and part Blocks 26/27, 35/2, and 35/3 on the Atlantic margin and contains Connemara oil field and several undrilled exploration prospects.

Horizon Energy Partners currently is conducting an integrated subsurface study, which is key to determining the potential field performance and hence commercial feasibility of developing Connemara field, Island said.

Both farmout agreements are subject to approval from the Irish Minister for Communications, Marine, and Natural Resources.

Meanwhile, Island Oil & Gas said an option agreement with EnCore Oil PLC to acquire up to 20% in the Connemara License has been extended until June 30, 2007 (OGJ Online, Oct. 9, 2006).