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Oilex enters deals for East Irish Sea licenses

Oil and gas explorer Oilex Limited has entered into deals, which could see the company acquire interests in prospects located offshore the UK.

Oilex Limited said in a statement on Monday it had entered into a binding term sheet with Burgate Exploration and Production to acquire a 100% participating interest in the Doyle-Peel license (P2447) in the East Irish Sea (EIS), offshore the UK.

In addition, the company has entered into an exclusivity agreement with Burgate, Comtrack (UK) Ltd, and Simwell Resources (collectively BCS) for the potential acquisition of a 100% participating interest in the Castletown license (P2076).

According to the company, the EIS licenses provide an attractive entry into a proven gas fairway in the center of the East Irish Sea Basin. Furthermore, the licenses are in shallow water near existing infrastructure reducing the complexity, risk, and cost of development. The EIS is a prolific basin which has produced around 8 TCF of gas to date with considerable existing gas production, gathering, processing, and transportation infrastructure. The depth to the target reservoirs is less than 2,000 meters thus providing modest drilling costs.

The licenses lie on the west-dipping graben edge of the Tynwald Fault Zone on the structural trend with the Rhyl and North Morecambe producing gas fields. Historical production from the primary Triassic Ormskirk reservoirs on this trend show excellent deliverability characteristics.

The Ormskirk sandstones were deposited in a continental fluvial regime which became drier and more aeolian (with a higher proportion of dune sands) towards the top. The regional seal is provided by the evaporites and mudstones of the Mercia Mudstone group which attains a thickness in excess of 1,000m across the basin resulting in low seal risk. The gas charge comes from the Carboniferous Coal Measures which underlie much of the basin. A secondary reservoir-seal pair is provided by the Permian Collyhurst sandstone and overlying evaporites.

 

Doyle-Peel prospects

 

The Doyle prospect consists of a tilted fault block closed on the up-dip east side by the north-south trending boundary fault of the Tynwald Fault Zone. This fault down throws to the east and the footwall of Ormskirk sandstone juxtaposes Mercia Mudstone salts and shales forming a very effective cross fault seal. There is a clearly defined east-west fault bounding the southern extent. The fault block is distinguished by the strong reflection response shown on the amplitude display.

The Peel prospect is a fault block occupying a structurally similar setting to Doyle and the producing Rhyl gas field. It is fault-bounded to the east by the Tynwald Fault Zone, with effective cross fault and top seal provided by the Mercia Mudstone. To the south and southwest dykes have been emplaced which would provide near-vertical seals. The amplitude of the Ormskirk reflector is similar in reflection strength to the Rhyl productive area providing the possibility that this indicates a gas charge.

Blocks 113/22a (Doyle) and 113/27e (Doyle and Peel) have been merged into a single license being P2446. Block 113/22a was awarded in the UK Offshore 31st licensing round whereas block 113/27e was awarded in the 30th round.

The committed work program for the P2446 license comprises a firm commitment by October 2021 to obtain and reprocess 50 square kilometers 3D seismic data, obtain 2,500 km Aeromagnetic data and complete a Rock Physics study following which the license has a three-year drill or drop election.

 

Castletown structure

 

The Castletown structure is also situated within the Tynwald Fault zone, just east of the Peel prospect. The well 113/27-2 was drilled in 1988 and discovered the Castletown gas accumulation in both Omskirk and St Bees Triassic sandstones and the Permian Collyhurst Sandstone. The Omskirk and St Bees provide the producing reservoirs in the adjacent Morecambe complex. The more recent depth migrated 3D seismic data indicates that the well was drilled significantly down flank of the crest and through a major fault and that a large gas accumulation may be proven up-dip.

The Castletown discovery is in Block 113/27d under Licence P2076. An additional fault closed prospect (Prospect A) is present in the License to the southwest of the Castletown structure. The prospect has similarities to the producing Rhyl gas field.

Burgate holds a 100% participating interest in Peel-Doyle, in the United Kingdom Seaward Production License (P2446, Blocks 113/22a and 113/27e).

Oilex has entered into a binding term sheet with Burgate to acquire a 100% participating interest in the P2446 License for consideration of payment of £60,000; issue of 42,500,000 fully paid ordinary shares in Oilex with a deemed value of £85,000, and overriding royalty to be paid on the following basis: 0.5% of actual gross revenue from commercial production up to the point when gross capital expenditures related to the development of the license have been fully recovered from net cash flows; and following payback, the royalty to be paid shall be 2.25% of actual gross revenues.

The completion of the acquisition of the license is subject to the UK Oil and Gas Authority (OGA) approving the assignment and transfer of the license from Burgate to Oilex; the execution of applicable documents necessary to transfer the Licence to Oilex; and execution of a royalty agreement in a form acceptable to the parties.

Oilex has also entered into an exclusivity agreement with BCS to secure an exclusive right to negotiate with BCS in respect of the proposed acquisition of Castletown. In this regard, Oilex has undertaken to pay £68,000 to BCS in January 2020 regarding the applicable license fees payable to the OGA for the 2020 year.

BCS has granted Oilex exclusivity until March 31, 2020, during which time it is intended that the terms of the definitive documentation and funding for the proposed transaction will be finalized, and Oilex will seek confirmation from ASX that Listing Rules 11.1.2 and 11.1.3 will not apply to the potential Castletown acquisition.

 

‘Attractive entry’

 

Managing Director of Oilex, Joe Salomon, said; “The EIS licenses provide an attractive entry particularly as they lie adjacent to existing producing fields in a proven gas fairway in the center of the East Irish Sea Basin. The Doyle-Peel prospects have the potential to host substantial prospective resources and Castletown has discovered gas in multiple reservoirs with the next step being the preparation of a field development plan including appraisal/development drilling.

“Importantly, the Doyle-Peel license is the company’s first committed entry into the UKCS. In 2020, the company will seek to build the company’s critical mass in the UK with further synergistic acquisitions including the potential Castletown acquisition.

“The company continues to make solid progress on three fronts with the clear objective of building value for its investors by adding to the company’s opportunity set. Outside of the UK, the company’s Cooper Basin strategy is progressing steadily with demonstrable milestones anticipated in early 2020. Importantly, in India, the company’s Cambay project is at the final stages in resolving a long-running and complex dispute with its Joint Venture partner ahead of an active drill program planned in 2020.”


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