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18 July 2013
Mediterranean Oil & Gas Plc
(the "Company" or "MOG")
Operational Update
The Board of Mediterranean Oil & Gas Plc (AIM: MOG) is pleased to announce the following operational update related to the Company's activities.
Highlights
· Rapid and positive developments at offshore Malta Area 4:
o Paul Romano deep-water semi-submersible drilling rig secured to drill the Hagar Qim 1 exploration well.
o Completion of well site seabed survey by Fugro Ocean Seismica S.p.A. ("Fugro").
o Contract signed with AGR Well Management Ltd. ("AGR") for drilling support services and all equipment has been procured.
o On track to spud Hagar Qim 1 exploration well in Q4 2013.
· Despite earlier positive rulings, the Ombrina Mare production concession award is further delayed by the Italian Ministry of Environment and of Protection of Land and Sea ("MEPLS"):
o Positive Environmental Impact Assessment ("EIA") Commission ruling on Ombrina Mare on 25 January 2013.
o EIA Director General of MEPLS sent the draft EIA decree with a positive recommendation to the office of the Minister on 17 April 2013.
o Following the receipt of a contradictory letter on 10 July 2013 from MEPLS, the Company is considering its position and next steps.
o Unlikely to achieve production concession award in 2013.
· On track to drill the onshore Italy Faseto exploration well by year-end 2013.
· Q2 2013 net production was 7.51 MMscm, representing an average net production of 82,560 scm per day.
· Guendalina Field well GUE-2ss (ENI 80% and operator) has been shut-in since March 2013.
o The partners are studying the feasibility of increasing production from the GUE-3ss well to partly compensate for the production shortfall.
o Total field reserves from the field are believed to be unaffected.
· MOG total Q2 2013 revenue of ?2.35 million, at an average price of ?0.31 per scm.
Dr. Bill Higgs, Chief Executive of Mediterranean Oil and Gas, commented:
"The second quarter of the year has seen very significant progress with our activities in Malta as we get closer to the drilling of the Hagar Qim 1 exploration well with our partner Genel Energy.
Progress in Italy has been slower than anticipated and the continued challenges to conducting our activities reinforce our strategic objective to diversify our portfolio and areas of operations.
As planned, we enter the second half of the year with major value driving events still ahead of us and we look forward to updating shareholders on progress."
Malta:
The second quarter has continued to see rapid and positive progress at offshore Malta Area 4 blocks 4, 5, 6 & 7, where we have a 25% interest in Phoenicia Energy Company Ltd ("PECL"), which has the exploration and development rights under the Production Sharing Contract. Along with our partner, Genel Energy Plc ("Genel"), we have secured the use of the Paul Romano deep-water semi-submersible drilling rig to drill one exploration well in Q4 2013. The Paul Romano will drill the Hagar Qim 1 exploration well in water depths of approximately 450 metres and will target reservoirs at a depth of approximately 2,500 metres. The exploration well will target unrisked likely gross prospective resources in the Lower Eocene/Paleocene of 109 MMboe (27 MMboe net to MOG).
On 21 June 2013, PECL signed a 16km2 well seabed site survey contract with Fugro for the Hagar Qim 1 well and the site seabed survey being undertaken by the vessel Minerva 1 has now been completed. The data obtained will assist the operational team in determining the most suitable location for the well.
A contract has been signed with AGR for the provision of drilling support services to aid in the planning and execution of the drilling activities. All equipment required for the drilling has now been procured and the logistics for the well are on track to be ready ahead of the anticipated spud date in Q4 2013.
Ombrina Mare:
In response to the lengthy and continuing delays to the EIA approval for the Ombrina Mare Project, the Company wrote to MEPLS on 1 July 2013 giving 10 days' notice to complete approval of the EIA, in accordance with applicable regulations.
Following completion of this 10 day period, MEPLS issued a letter to the Company requesting the Company to complete an 'Autorizzazione Integrata Ambientale' (an Integrated Environmental Authorisation) ("AIA") for Ombrina Mare as an additional pre-condition for MEPLS to consider the approval of the EIA.
This is contrary to previous written notification issued by MEPLS to the Company in October 2012 that, consistent with the conditions required by Italian environmental law, the EIA procedure could be completed without performing the AIA at this time. It also follows the ruling issued in favour of MOG's EIA submission by the EIA Technical Committee on 25 January 2013, and the EIA Director General of MEPLS sending the draft EIA decree with a positive recommendation to the office of the Minister on 17 April 2013.
In light of MEPLS response, the Board is reviewing a number of options in consultation with legal counsel and reserves its rights regarding the continuing delay to the Ombrina Mare Project.
Work on the Ombrina Mare CPR by ERC Equipoise Ltd, which will provide an up-to-date estimate of reserves and resources ahead of the Company's plans to drill a pilot development well is being finalized, the results of which will be announced when appropriate.
Onshore Italy Exploration:
Solid progress has been made in preparations to drill the Faseto exploration well, with well site preparations due to commence in September 2013. This well, operated by Gasplus (MOG W.I. 11%) is targeting 350,000 boe net to MOG in the foredeep gas play.
Plans for drilling the Santa Liberata and Masseria Sipari exploration wells are still pending receipt of approval of their respective EIAs.
Production:
MOG's total net production for Q2 2013 was 7.51 million scm (equivalent to 0.27 Bcf, or 47,764 boe) and 17.386 MMscm for the first half of the year, in line with guidance provided by the Company in April 2013. This represents average net production of 82,560 scm per day or 525 boe per day during Q2 2013 and average net production of 96,055 scm per day or 611 boe per day during the first half of 2013.
The Guendalina Field achieved net gas production (MOG 20% W.I.) of 6.41 MMscm (equivalent to 0.23 Bcf or 40,768 boe). This represents average net production of 70,435 scm per day or 448 boe per day in Q2 2013.
Production levels were down quarter-on-quarter due to Guendalina Field well GUE 2ss being taken offline on 5 March 2013 to determine the cause of an influx of water which resulted in the well ceasing production. MOG continues to work with the operator to analyse the possible remedial work that can be undertaken to restart production. GUE 2ss well is not expected to come back on stream in 2013. We are studying the feasibility of increasing production from the GUE 3ss well to compensate for part of the production shortfall. Prior to the shutdown, well GUE 2ss accounted for approximately 30% of total production from the Guendalina Field.
In Q2 2013, the Company's onshore Italy gas fields achieved net production of 1.103 MMscm (equivalent to 0.039 million scf or 7,015 boe). This represents average net production to the Company of 12,125 scm per day or 77 boe per day in Q2 2013. The reduction in production can be partially explained by the Vigna Nocelli well, which produced 1,000 scm per day in Q1 being shut in from 25 February 2013. Technical studies suggest a work over is required to restore production and that the work can be executed before the end of 2013.
Revenues:
MOG's total revenue for Q2 2013 was ?2.35 million, representing an average realised price of ?0.31 per scm. Total revenue for the first half of the year was ?5.4 million. In this period, net revenue from the offshore Guendalina Field was ?4.6 million and ?792,000 for the onshore Italy gas fields.
Litigation:
In accordance with the timetable established by the High Court of Justice of England and Wales at the Case Management Conference held on 17 May 2013, a list of all relevant disclosable documents relating to the claims brought by Leni Gas & Oil Plc ("LGO") and Leni Gas & Oil Investments Limited ("LGOI") will be provided to LGO and LGOI tomorrow. Similarly, the Board of MOG expects LGO and LGOI to be equally forthcoming in the disclosure of their documents at this time. A trial date has been set for early March 2014. The Company continues to refute all of the various claims that LGO and LGOI have made and will work to protect the interests of shareholders. Activities in Malta are unaffected by the on-going legal dispute.
Takeover and Mergers Panel:
In its circular to shareholders dated 23 April 2011, the Company stated that the Panel on Takeovers and Mergers ("the Panel") had confirmed that, in its view, the Company's place of central management and control was outside of the United Kingdom, and therefore the Takeover Code ("the Code") did not apply to the Company.
Since that date, the composition of the Company's Board has changed significantly and it is the Board's view that the Company's place of central management and control is now within the United Kingdom and therefore the Code does currently apply to the Company.
It should also be noted that the Panel published Instrument 212/3 on 15 May 2013 amending the Code by removing the "residency test" with effect from 30 September 2013. As a result of this change, the Company will, from that date, be subject to the jurisdiction of the Code irrespective of the location of its place of central management and control.
QUALIFIED PERSON
In accordance with the guidelines of the AIM Market of the London Stock Exchange, Dr Bill Higgs, Chief Executive Officer of Mediterranean Oil & Gas Plc, a geologist, explorationist and reservoir manager with over 23 years oil & gas industry experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies, who has reviewed and approved the technical information contained in this announcement.
ENQUIRIES:
Mediterranean Oil & Gas Plc www.medoilgas.com Bill Higgs, Chief Executive/Chris Kelsall, Finance Director | Tel: +44 (0)203 178 5807 |
Liberum Capital Limited (Nominated Adviser and Joint Broker) Clayton Bush/Ryan de Franck/Tim Graham | Tel: +44 (0)20 3100 2222 |
RBC Capital Markets (Joint Broker) Matthew Coakes/Jeremy Low /Jonny Hardy | Tel: +44 (0)207 653 4000 |
FTI Consulting (Public Relations) Billy Clegg/Alex Beagley/Georgia Mann | Tel: +44 (0)207 831 3113 |
Glossary
· scm: | Standard cubic meter |
· MMscm: | Million standard cubic meters |
· scf: | Standard cubic feet |
· Bcf: | Billion standard cubic feet |
· Boe: | Stock tank barrels of oil equivalent |
· MMboe: | Million stock tank barrels of oil equivalent |
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