Fastnet Oil and Gas investors keep their fingers crossed for FA-1 well on Foum Assaka licence offshore Morocco
Apr 5, 2014 at 8:31 am in AIM by contrarianuk
Looking at AIM oil and gas companies with significant, make or break, drilling news in the next few months, Fastnet Oil and Gas (FAST) fits the bill.
FAST is an independent oil and gas exploration company focused on identifying early stage exploration and appraisal opportunities in Offshore Ireland and Africa. It is quoted on AIM and the Enterprise Securities Market (ESM) of the Irish Stock Exchange.
The company’s shares are currently at 10.75p, giving it a market cap of £37.13 million, 52 week range (9.6p-25.6p). Like many AIM oil and gas companies, the shares have had a rough time over the last year and are well down of the last funding raising in November 2013 which placed shares at 14p.
After being admitted to AIM in June 2012, Fastnet acquired its Moroccan licences (offshore and onshore Tendrara Lakbir licence) with the acquisition of Pathfinder followed up by further acquisitions in the Celtic Sea (Mizzen, Mizzen East, Block 49/13, Shanagarry, Molly Malone).
The key members of Fastnet’s management team are Cathal Friel, Executive Chairman who has mainly corporate finance experience and Paul Griffiths, Managing Director, who is is a petroleum geologist with over 35 years experience in early stage oil and gas prospecting.
Cathal Friel, Executive Chairman
Fastnet’s main interest is Foum Assaka offshore Morocco which came with the acquisition of Pathfinder Hydrocarbon in 2012 with a shares and cash deal (40.7 million shares (25% of the equity capital prior to the deal) and $1 million in cash).
Pathfinder had an 18.75% stake in in the Foum Assaka licence, offshore Morocco. On 18th December 2013 Fastnet farmed down this interest to 9.4% with Korean-listed SK Innovation with up to two well s being carried and with the reimbursement of past costs of $3.2 million and a further payment of 25 per cent of Fastnet’s back costs relating to the period from 1 October to 1 January 2014.
In October 2013 Kosmos announced that it had entered into a farm-out agreement with BP plc to earn a 26.325% participating interest (35.100% paying interest) in the Licence Area.
The ownership of Foum Assaka is now split Kosmos 29.9%, BP 26.3%, ONHYM 25%, Fastnet 9.4%, SK innovation 9.4%.
In May 2013 Fastnet acquired an option over the Tendrara Lakbir licence, onshore Morocco. The company will drill an appraisal well on the TE-5 structure to earn a net 37.5% interest in the licence and then follow up with two further wells ater a drill or drop decision, In November 2013 SLR Consulting estimated that the TE-5 Structure had gross best estimate contingent resources of 310Bcf based on a 65% recovery factor. Fastnet plans to drill and test an appraisal well on the TE-5 Structure by 30 September 2014.
Though the company farmed out with PSE Kinsale Energy Limited in February 2013, a wholly owned subsidiary of Petronas, to farm in to the “Deep Kinsale” Prospect it has frustrated investors by failing to find farm out partners for its main Irish licences but the company is hopeful given the availability of detailed 3D seismic data. A 3D seismic survey in the Celtic Sea was completed in June 2013, covering a total area of 1,910km2. The 3D seismic data was acquired over the Mizzen and East Mizzen (1,400km2) and Deep Kinsale (510km2). Further announcements relating to the company’s Celtic licences are expected in the first half of 2014.
On 17th March, FAST announced that its partner and operator in the Foum Assaka area, offshore Morocco, Kosmos Energy Deepwater Morocco had confirmed that the FA-1 well, on the Eagle Prospect, spudded on March 16 2014. Fastnet holds its interest in the Foum Assaka licence area through its wholly owned subsidiary Pathfinder Hydrocarbon Ventures Limited.
The company is hoping for better luck than Cairn Energy’s recent FD-1 well in the adjacent Foum Draa Block which failed to find commercial hydrocarbons and certainly didn’t help sentiment in the battered Fastnet share price.
The planned target depth is 4,000 metres in water depth of approximately 600 metres and the well is expected to take up to three months to reach TD and test The FA-1 well is estimated to contain 360 mmboe of Pmean resources in its primary deepwater Lower Cretaceous reservoir objective.
Fastnet is carried through its share of the drilling costs, subject to a gross maximum well cost of US$100 million, following the previously announced farm-out to SK Innovation, retaining a 9.375% net interest in the licence.
The company had cash of £16.6 million at the end of December 2013 with no debt, and its 2014 expenses are in the region of £11 million. In November last year the company raised £10 million (before expenses) through an oversubscribed placing of 71,428,578 new ordinary shares at 14 pence per share. It is trading on an EV/net 2C contingent resource plus net risked work programme 2P prospective resource multiple of just US$1.96/boe.
So the focus is now the FA-1 well on Foum Assaka licence offshore Morocco, with results due June after the spud in mid-March. A potential game changer if the drill bit strikes it lucky, but with these wild cat wells, there is unfortunately much more chance of a failure than success. With sentiment around African focused drillers like Chariot, Ophir Energy and Tullow pretty much rock bottom right now, investors are hoping that Kosmos Energy’s well delivers plenty of hydrocarbons.
Contrarian Investor UK
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