Fastnet, the UK and Irish listed E&P company focussed on near term exploration and appraisal acreage in Morocco and the Celtic Sea, announced that its wholly owned subsidiary Pathfinder Hydrocarbon Ventures Limited (Pathfinder) has entered into an amended exclusive option agreement with Oil and Gas Investments Funds (OGIF) (the "Option Agreement"), in relation to eight Exploration Permits comprising the Tendrara Lakbir Petroleum Agreement (the Tendrara Licence) onshore Morocco.
Following substantive negotiations with its partner OGIF, Fastnet has secured improved commercial terms from those previously announced on 29 May 2013. These include:
· Extension of the Option Agreement to 31 December 2014
· Fastnet's net equity interest increased from 37.5% to 50% upon the option being exercised and subject to the necessary Moroccan Government approvals
· Fastnet will carry OGIF in the first well required during the Initial Period of the Tendrara Licence
· At Fastnet's election, Fastnet will carry OGIF for a well on the TE-5 Structure, or an exploration well on any alternative gas prospect and/or existing gas discovery in the Tendrara Licence Area as required by the committed work programme of the First Extension Period
· This reduces the drilling commitments under the original Option Agreement, which involved carrying OGIF in three wells; the first well plus two additional appraisal/exploration wells by 1 April 2015 and 1 April 2018, respectively
· The deadline to drill the first well has been extended from 30 September 2014 to 21 April 2015. The time in between exercising the Option Agreement and the drilling deadline allows Fastnet to acquire its net equity interest in the Tendrara Licence and Association Contract prior to commencing the drilling programme as the designated operator
· Fastnet will be required to provide OGIF with an executed drilling contract or alternatively an irrevocable bank guarantee of USD$2.75 million
In addition the revised commercial terms under the Option Agreement described above, Fastnet is also pleased to provide the following operational update in relation to the Tendrara Licence:
· Reservoir engineering studies have been completed and currently the new Pre-Stack Seismic
Depth Migrations are being interpreted to select final drilling locations and to finalise well design
· Well planning, rig selection and environmental impact studies are ongoing and will be completed during this calendar year
· In order to accelerate monetisation of the TE-5 gas asset, Fastnet is seeking an additional drilling partner, with onshore gas development experience, to facilitate executing a drilling programme that will target materially higher potential gross gas resources; the gross unrisked High Estimate gas resources for the TE-5 Structure are 891.9 BCF.
The Best Estimate gas resources, targeted by the original proposed drilling programme, are 310.5 BCF
· Discussions with suitably qualified potential partners, who have all expressed an interest in participating in a potential gas development, are underway and are expected to conclude in H2 2014Paul Griffiths, Managing Director of Fastnet, commented:
"The revised terms significantly reduce Fastnet's financial exposure and provide us with much improved project economics. The process of bringing in an additional partner is underway. We expect that the new commercial terms and project economics should allow us to attract a major partner, with experience in developing and monetising onshore gas discoveries, by offering sufficient equity, whilst maintaining a material equity level for Fastnet shareholders as we seek to target materially higher potential gas resources in the planned drilling programme. We maintain our strategy of prudently managing our cash resources as we did through our successful Foum Assaka farm-out, which de-risked our financial exposure to the drilling costs. We believe that the Tendrara Licence is highly attractive to a potential strategic gas partner given the existing TE-5 gas discovery with near term development potential, and the additional prospectivity of multiple play types within the large licence area which provides significant potential upside."