LONDON (Alliance News) - InfraStrata PLC Thursday said it has completed drilling and data gathering operations at the Islandmagee-1 well in Northern Ireland, but also said it will not be able to drill the commitment well on a license in Dorset before the deadline early next year.
The Islandmagee-1 well was drilled to a total depth of 1,753 metres, and the aim of the drilling was to confirm the feasibility of the development of an underground gas storage facility in salt caverns by obtaining wireline data and core samples of the Permian salt to test. The results of those tests will contribute to the design parameters and cost estimate for the project.
Companies develop caverns in an underground salt layer in order to store various types of hydrocarbons underground.
Of the total cost of the project, 50% will be funded by the European Commission under the Connecting Europe Facility.
The results from the testwork will be followed by the project developer, Islandmagee Storage Ltd, in which Infrastrata holds a 65% stake, completing the work programme in the fourth quarter of 2015, it said in a statement.
Fellow-listed Baron Oil PLC also noted the announcement, having signed a convertible loan deal with Infrastrata in May, under which it has provided Infrastrata with a EUR1.8 million loan, with an option to convert the loan into a 15% stake in the Islandmagee project.
"The board continue to believe this project on Islandmagee, adjacent to the largest power station in Northern Ireland and also the UK Gas and Electricity Inter-connector outlets, has substantial commercial value," said Baron Oil Chairman and Chief Executive Bill Colvin.
"We are very pleased that the first phase of the 2015 work programme has confirmed expectations and been completed successfully and safely. We now look forward to completing the remaining work over the coming months," said Infrastrata Chief Executive Andrew Hindle.
In a separate statement Thursday, Infrastrata said the reprocessing of two offshore 3D seismic surveys over the Block 98/11 in the P1918 license offshore Dorset will be completed before the end of June.
InfraStrata holds a 54% stake in the P1918 license, with a further net interest of 14.4% in the license via its holdings in its partners on the license, Corfe Energy Ltd and Brigantes Energy Ltd. Southwestern Resources Ltd also is involved in the license.
Permitting is "nearing completion" for the 2D seismic acquisition over the Purbeck prospect at the license, where the company has planning permission to drill a well, California Quarry-1. However, due to a seasonal restriction it will not be possible to acquire the data until August at the earliest, said InfraStrata.
A well is required to be drilled on the license by February 2016, the end of the first term of the licence, to retain P1918 into its second term. However, InfraStrata said this will not be possible for a number of reasons, and therefore the company will be seeking to extend the existing license.
InfraStrata said the California Quarry well can not be drilled by February because the company is "not able to" commit to a drilling rig to test the Purbeck prospect until the 2D seismic has been acquired, processed and interpreted.
It also said the proposed California Quarry-1 well is an onshore to offshore well and it is necessary for the area from which a well is drilled to be held under a petroleum licence. According to the company, that license can not be attained until the results of the 14th Landward Licensing Round have been released "later this year".
"These factors mean that it will not now be possible for the well to be drilled before the February 2016 deadline. With this in mind, the joint venture group will be seeking an extension to the initial term of the licence," said InfraStrata.
Dependent on whether that license extension is awarded, InfraStrata and the joint venture partners have signed a heads of terms agreement for Southwestern, which currently holds a 10% stake in the license, to fund the entire USD400,000 initial work programme.
In return, Southwestern will be given a further 65% stake for funding the programme, which will include drilling the exploration well and the cost of the ongoing seismic reprocessing work and the new seismic acquisition. That agreement is contingent on the license being extended.
If that goes ahead, InfraStrata will hold a 19% stake in the project, and Southwestern a 75% stake, with Corfe Energy Ltd and Brigantes Energy holding the remaining balance.
"Good progress has been made with the further evaluation of the prospectivity on P1918. We have been developing a wider exploration strategy for the Dorset area with partners and will provide a further update over the Summer on those activities as well as hopefully confirm an extension of the licence term to enable an exploration well to be drilled in 2016," said Hindle.
InfraStrata shares were down 2.9% to 4.25 mid-Thursday morning, whilst Baron Oil shares were down 0.6% to 0.870p.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Baron Oil (BOIL)