Europa Oil & Gas : Preliminary reults

Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG / Sector: Oil & Gas 17 October 2018

Europa Oil & Gas (Holdings) plc ('Europa' or 'the Company')

Final Results for the year to 31 July 2018

Europa Oil & Gas (Holdings) plc, the UK and Ireland focussed oil and gas exploration, development and production company, announces its final results for the 12 month period ended 31 July 2018.

The full Annual Report and Accounts will be available shortlyon the Company's website atwww.europaoil.comand will be mailed in November 2018 to those shareholders who have requested a paper copy.

Operational highlights Offshore Ireland

•	Six prospects with combined potential of 2.5 trillion cubic feet ('tcf') of Gas Initially In
Place ('GIIP') mapped on LO 16/20 in the Slyne basin.
•	Completed Pre-Stack Depth Migration ('PSDM') reprocessing of 1,548km2 3D seismic
covering FEL 1/17 and FEL 3/13, in the South Porcupine. Prospect inventory upgraded to
3.5billion boe gross mean unrisked prospective resources ('GMUPR') insix prospects.
•	Completed PSDM reprocessing of 950 km2 3D seismic over FEL 2/13. Prospect inventory
identified 817mmboe GMUPR in three top ranked prospects.
•	Porcupine virtual data room ('VDR') and farmout process opened.
•	Commenced PSDM reprocessing of 770 km2 3D seismic data over LO 16/20 and
preliminary drilling planning for a possible 2019 exploration well on the Inishkea prospect.
•	Completed 976 km2 3D seismic acquisition over Cairn Energy operated LO 16/19.
UK
•	PEDL180 (Wressle) the Planning Inspectorate rejected an appeal against North Lincolnshire
County Council Planning Committee's decision to reject a planning application for the
Wressle oil development. A new planning application for the Wressle oil development has
been submitted to North Lincolnshire County Council and is in the review process.
•	The application to extend planning permission at the Wressle site was refused by the
planning committee; an appeal against this decision has been submitted to the Planning
Inspectorate.

Financial

• •Group revenue of £1.6m (2017: £1.6m)

• •Exploration write-off £1.3m (2017: nil)

• •Pre-tax loss of £2.3m (2017: loss £0.7m)

• •Post-tax loss for the year £2.6m (2017: loss £0.5m)

• •Cash used in operating activities £0.48m (2017: cash used £0.26m)

• •Net cash balance as at 31 July 2018 £1.8m (31 July 2017: £3.6m)

Post reporting date events

• •PEDL143 (Holmwood) the Secretary of State for Environment, Food and Rural Affairs, decided not to renew the lease at Bury Hill Wood, Coldharbour Lane leading to a withdrawal of the planning application to drill from the site.

Europa's CEO, Hugh Mackay, said"Europa has made a large technical and financial investment across virtually its whole Atlantic Ireland portfolio. This has involved three substantial 3D PSDM seismic reprocessing projects that started in January 2017 and will complete in October 2018.

"Two South Porcupine reprocessing projects have been completed and have resulted in new prospect inventories for our three operated Porcupine licences, 4.3 billion barrels GMUPR and six drill ready prospects. Our farmout process commenced in July 2018 and the target market of supermajors, majors and large independents are in the virtual and physical datarooms (VDR and PDR). We are encouraged by the recent farm-in of ExxonMobil to Nexen in FEL 3/18 and note that their 2019 Iolar well has the potential to de-risk 1 billion boe in five Europa pre-rift prospects in the basin.

"Our Inishkea reprocessing project is nearing completion and the new prospect inventory will be issued in December, at which point the new VDR and PDR will be opened to potential farminees. We are looking to drill as early as 2019, subject to industry or financial partnering and we have been sufficiently encouraged by the positive results to commence both the well planning and site survey preparation necessary for a 2019 spud. With the Corrib gas field going into decline andIreland'sdemand for both gas and electricity forecast to increase in response to its vibrant economy we believe there is a window of opportunity for gas that we must seize at Inishkea.

"Elsewhere, our existing UK onshore production continues to generate meaningful revenues which at current oil prices more than cover our operational expenses. We are hopeful these are set for a major boost in the year ahead should the planning application to develop the Wressle oil discovery in the East Midlands be approved. At an estimated gross rate of 500bopd, Wressle would morethan double our net output to around 240 bopd which, at today's oil prices, would provide us witha highly cash generative platform with which to invest in other projects. This could include new ventures which we are actively pursuing. Together with ongoing discussions with potential partners for our Atlantic Ireland licences, there is much activity taking place focused on generating significant value for our shareholders."

Chairman's statement

For an explorer and producer such as Europa, drilling wells is a key value driving activity. While Europa did not participate in drilling activity during the review period, considerable technical work has been undertaken across our asset base to make our prospects drill ready. We have initiated the planning phase for drilling what could be a transformational well on our Inishkea prospect in the Slyne Basin, offshore Ireland as early as 2019. Our intention is to participate in not one, but a series of high impact wells offshore Ireland and we have therefore been focused on building a pipeline of drill-ready opportunities, each of which has game-changing potential. I am pleased to report that we are on target to exceed the six drill ready prospects by the end of 2018 foreseen in our last Annual Report and Accounts.

Offshore Ireland

With six licences covering an area of 4,985 km2 and containing over 30 prospects that potentially hold GMUPR of more than 6.4 billion barrels of oil equivalent and 2.5 tcf of GIIP, Europa has an industry-leading position in Atlantic Ireland. For an oil and gas company of Europa's size to beactively involved in opening up an emerging hydrocarbon region alongside supermajors, majors and large independents such as Exxon, Nexen, Equinor, TOTAL, Woodside and Cairn Energy, is a considerable achievement and one which we intend to build on.

During the year and post period end, technical work programmes have been undertaken across our offshore Ireland portfolio. The objective, specifically for our South Porcupine and Slyne licences, has been to de-risk existing prospects and leads and deliver drill-ready targets. Though work is ongoing, this programme has been highly successful and today Europa has six drill-ready targets, with more expected by the end of the year. We are now in a position to embark on the next phase of exploration in Atlantic Ireland, namely drilling.

In line with this, planning is underway to drill a potentially transformational well as early as 2019 on LO 16/20 in the Slyne Basin, the Group's flagship licence where multiple structures withpotentially over 2.5 tcf GIIP have been mapped. The combination of a robust geological model that has undergone rigorous technical scrutiny, the targeting of a gas play that has been proven up by the nearby producing Corrib field and the Shell 18/20-7 gas discovery well drilled in 2010, the close proximity to infrastructure, and relatively low drilling costs due to shallow water depths, all make LO 16/20 a compelling investment. We are therefore focusing on securing industry or financial partners at the project level to enable operations to commence as soon as possible.

Elsewhere work on FELs 2/13, 3/13 and 1/17 in the South Porcupine has been centred on upgrading previously mapped prospects to drill-ready status so that once partners are in place, well planning and drilling can commence. The results have exceeded expectations. Not only has the multi-billion barrel prospectivity of the licences been confirmed and drill-ready targets been defined for each of the licences, but the definition of the structures and geology have been greatly enhanced. The very positive response by the industry to the formal launch of the farmout in July 2018 suggests we are not alone in being impressed by the results.

Subject to farmouts being secured and in line with our strategy, shareholders could soon be exposed to a series of high impact wells offshore Ireland. Furthermore, following a major seismic acquisition programme over the last few years, other operators are moving forward with their own drilling plans. Nexen, for example, is due to drill a well in FEL 3/18 during 2019. Our licences feature all the plays being targeted, including the Cretaceous Fan play (a prolific producer offshore West Africa), the Cretaceous Shelf (which has yielded large discoveries offshore Senegal), the pre-rift play (from which 15 billion barrels have already been produced from the UKCS Brent Province) and the Syn-Rift play (which has attracted considerable investment offshore Newfoundland). As a result, Europa stands to benefit from any and all successes in Atlantic Ireland.

Onshore UK

During the year under review, Europa'sproduction averaged 94 boepd from three fields in the East Midlands petroleum province, confirmingEuropa's position as the third largest onshore UK oilproducer. We constantly strive to increase our production, not just by making new discoveries, but also by evaluating and implementing initiatives to increase production and recovery rates at our existing oil fields. A number of operational initiatives are underway and we hope to be in a position to report the results later in 2018.

Bringing new discoveries online offers the potential to step up production rates. With this in mind, we had hoped the Wressle discovery would be brought onstream in the first half of 2018 at an estimated rate of 500 bopd gross. At this level, our 30% interest would have resulted in more than a doubling of our net production to over 240 boepd. Following two unsuccessful planning applications to develop the field in 2017, both of which had been recommended by NorthLincolnshire Council's own planning officers, Wressle remains undeveloped. A new applicationhas since been submitted by the operator, Egdon Resources, and a decision by the Council'sPlanning Committee is expected later in 2018. The partners are confident that this latest plan comprehensively deals with all outstanding issues and that this lucrative low risk development opportunity will soon gain the necessary approvals to enable it to be brought on stream without further delay.

There has been disappointment for our Holmwood prospect on PEDL143 which lies close to the Horse Hill discovery and Brockham field in the Weald Basin. Post period end the Secretary of State for Environment, Food and Rural Affairs declined to renew the lease for the drill site. As a consequence we have had to withdraw our application to extend planning permission to drill from the Bury Hill Wood site. The plan now is to evaluate PEDL143's remaining prospectivity anddevelop a forward plan for the licence in conjunction with our partners.

New licence areas

In the year we have evaluated a number of new opportunities outside our existing portfolio. These have been at various stages of development and I am pleased to report that following completion of a comprehensive new country screening study an application has been made for a high impact exploration licence that has technical synergy with our existing Atlantic margin portfolio. We shallcontinue to seek projects that will add value, diversity and strength to Europa's portfolio.

Board Changes

In January 2018, changes were made to the Board, including my appointment as Non-ExecutiveChairman following Colin Bousfield's decisionto step down from this role. I am a petroleum engineer with a background in senior oil and gas management, deal evaluation and execution, fundraising and investor relations most recently with Gemini Oil and Gas and Enterprise Oil. BrianO'Cathain, a geologist and petroleum engineer, was also appointed as a Non-Executive Director. He has held senior technical and commercial roles in major E&P companies, including Shell International, Enterprise Oil and Tullow Oil and gained first-hand knowledge of Corrib and the Slyne Basin when he was Managing Director of Enterprise Oil Ireland with responsibility for advancing Corrib towards development. Together we look forward to continuing our contribution to the exciting future of Europa.

Outlook

A significant part ofEuropa's strategy is high impact exploration centred on gaining early entryinto new plays, undertaking comprehensive technical work to identify and de-risk targets to the point of drilling and then securing partners to take licences forward. Having built up an industry leading licence position in the emerging hydrocarbon hotspot that is Atlantic Ireland and having subsequently established an inventory of high-grade prospects in various plays that is attracting the attention of industry heavyweights, Europa's management and technical teams have shown theycan deliver. The Board is therefore keen to replicate this success elsewhere and as a result newventures that complement Europa's existing skillset and portfolio offshore Ireland and onshore UKlicences are being pursued.

Much work still remains to be done across our existing assets, notably securing partners with whom we can drill wells in the South Porcupine and also completing well planning in the proven Slyne Basin so that we are in a position to drill. A considerable amount of activity is taking place both inside and outside our existing portfolio and I look forward to providing further updates during the year ahead, as we focus on exposing our shareholders to multiple value additive opportunities in a cost and risk efficient manner.

I would like to thank the management, employees, consultants and operational personnel for their dedicated work and also the Board for their support and help with the changes during the year.

Finally, may I thank our shareholders for their steadfast support over the past year when we have seen the beginnings of a recovery in our industry which I believe will be to the ultimate benefit of Europa.

Simon Oddie Chairman

Operations

Offshore Ireland: Exploration

Europa's portfolio of six licences in Atlantic Ireland covers an area of over 4,985 km2, includes sixplay types in three basins and contains over 30 prospects and leads that potentially hold over 6.4 billion barrels GMUPR of oil and 2.5 tcf of gas (GIIP).

The region has seen considerable activity and investment by supermajors, majors and leading independents in recent years. Specifically, ~30,000 km2 of 3D seismic has been acquired by bluechip operators such as Exxon, Woodside, Nexen, Cairn and Equinor as part of work programmes centred on de-risking a diverse range of plays that have proven to be prolific elsewhere in the North and South Atlantic margins. In the South Porcupine Basin, these include the Cretaceous Fan and Shelf plays which are considered to be analogous to the Jubilee and Mahogany oil fields in theequatorial Atlantic Margin province and Cairn's SNE discovery, offshore Senegal; the Pre-rift that is analogous to the North Sea Brent Province and Syn-rift plays that are analogous to the Flemish Pass play offshore Newfoundland. Meanwhile due to the producing Corrib gas field, Triassic gas is a proven play in the Slyne basin. Europa has a diversified prospect portfolio and is exposed to all these hydrocarbon plays. Any success in the region by other operators is therefore expected to have a positive read across for the Company.

The acquisition and interpretation of substantial volumes of 3D seismic data by the industry has taken place over the last five years and represents the first phase of exploration in the Irish Atlantic Margin. The next five-year stage is likely to involve a sustained period of drilling activity, starting in 2019 with Nexen testing the Iolar prospect on FEL 3/18. Europa intends to play an active role in this drilling phase, initially at its flagship Inishkea gas exploration project near the Corrib gas field in LO 16/20. Here the Company has identified 2.5 tcf of GIIP across six prospects on the licence. In parallel with ongoing work to upgrade the prospects on LO 16/20 to drill ready status, planning has commenced with a view to drilling a well in 2019.

Outside LO 16/20, during the period a substantial 2,498 km2 Pre-Stack Depth Migration ("PSDM")3D seismic reprocessing project was completed over the Company's three operated licences in the South Porcupine, FELs 2/13, 3/13 and 1/17. Following this work, Europa now has six drill-ready targets in the basin: Kiely East and Kiely West in FEL 2/13, Beckett and Wilde in FEL 3/13 and Edgeworth and Ervine in FEL 1/17. Our top ranked prospects for site survey and drilling are Kiely East, Wilde and Edgeworth. A virtual data room for prospective farminees was opened in July 2018 with the objective to secure partners to drill wells on the Company's Porcupine licences. Targetfarminees are supermajors, majors and large independents and they are currently active in both the physical and virtual data rooms.

Slyne Basin: LO 16/20 (Inishkea)

LO 16/20 is located in the Slyne Basin adjacent to the producing Corrib gas field. Unlike licences in the South Porcupine Basin, LO 16/20 is very much exploration in a proven basin comprised of Triassic sandstone reservoirs in tilted fault block structures, with gas generated from Carboniferous source rocks. In 2010, Shell drilled the 18/20-7 exploration well into the Corrib North structure on LO 16/20, 7 km from the Corrib gas field. Recently released well data has revealed that the well encountered a 70m gas column in the same Triassic sandstone reservoir as the Corrib field. As drilling was terminated in the reservoir, Europa believes the full gas column could be up to 170m and the surface area of the structure could extend to 5.75 km2. The presence of a gas reservoir substantially de-risks not just Corrib North but other prospects on the licence.

Based on the interpretation of historic 3D and 2D seismic, Europa has to date identified 2.54 tcf GIIP in six prospects and leads in the Triassic Gas hydrocarbon play on LO 16/20 (see table):

Prospect	GIIP (tcf)
Corrib North discovery	0.04
Inishkea	1.10
Inishkea NW	1.09
Inishkea W	0.21
Corrib NW	0.03
Bofin lead	0.07
Total	2.54