AMYT.L Regulatory News (AMYT)

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 km2 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The Licensing Option application was originally made jointly by Adriatic, CRB and PCX (each as defined below) which, prior to the execution of the farm-in agreements ("Farm-in Agreements") and the subsequent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:

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 km2 of new 3D seismic over the area before 31st 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:

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 200km2 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:

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.