Faroe Petroleum plc, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in the Atlantic margin, the North Sea and Norway, is pleased to announce the farm-out to Canadian Overseas Petroleum Limited (COPL), of West of Shetland licence P.1161 and the associated commitment to drill an exploration well on the Fulla prospect.
Licence P.1161 covering Blocks 206/5a, 10a is located approximately 10 kilometres to the north east of the producing Clair oil field and contains the Freya discovery and Fulla prospect. Freya was discovered in 1980 by well 206/10a-1, which encountered 475 feet of oil-bearing Devonian Clair reservoir sands. A drill-stem test was performed at the time of discovery but, similar to the first Clair appraisal wells, oil did not flow to surface and the oil quality in Freya and Fulla therefore remains a key uncertainty. The nearby Clair oil field is producing at a rate of between 30,000 and 50,000 barrels of oil per day.
The Fulla prospect is situated along the same structural trend immediately to the north east of Freya, in relatively shallow water of under 150 metres. The plan is to drill a vertical exploration well on the Fulla prospect in 2011.
Under the terms of the farm-out agreement, Faroe will retain a 50% interest in this licence and operatorship, while COPL will acquire a 50% interest and pay a proportionately larger share of costs on the Fulla exploration well. The completion of the farm-out is dependent upon the release of monies from escrow, following COPL's recent fund raising, and satisfaction of various conditions precedent, including DECC's consent to the transfer of the licence interest and acceptance of the well commitment.
Graham Stewart, Chief Executive of Faroe Petroleum, commented:
"We are very pleased to announce the farm-out and drilling commitment of this important west of Shetland exploration well, which will be the second Faroe Petroleum operated well in its drilling programme, following announcement of the Norwegian Clapton well (Faroe 40%) last week."
"The Company made two significant discoveries in the west of Shetlands area in 2009, in the Glenlivet and Tornado fields, and holds a very substantial acreage position across this important exploration province. The Freya and Fulla prospects have been part of Faroe's Atlantic margin portfolio for a number of years and offer exciting upside potential in a prospective area close to existing infrastructure and the significant Clair field."
