Farm-outs integral to 2014 progress
Lansdowne holds a balanced portfolio in the underexplored North Celtic Sea Basin. Despite this, investor interest is squarely focused on the 346mmboe Barryroe oil discovery, in which the company has a 20% working interest (WI), and where a successful farm-out would unlock value and bring further confidence in the region. Such a deal could also result in a positive push to the company’s separate farm-out process for its diverse drill-ready prospects in the area.
Barryroe farm-out fundamental to momentum
Lansdowne holds a 20% WI in the Barryroe oil discovery, which contains gross 2C resources of 346mmboe based on the 2013 CPR estimate and a net 2C of 69mmboe to the company. Operator Providence Resources formally began a farm-out process in mid-2013, which is still ongoing, although the time being taken to reach an agreement is entirely understandable given the size of the potential development. However, we expect that any farm-in deal would include additional appraisal to assess the field before development goes ahead. In view of this, we anticipate that any successful deal may take the form of a phased farm-out. Further appraisal could also include testing the deeper Jurassic potential, which lies beneath the main sands.
Further diverse prospects in portfolio
Lansdowne also has a number of drill-ready prospects in the basin that have been de-risked by 3D seismic. The prospects include the 231mmbbl Amergin oil prospect and the 268bcf Midleton gas prospect. A farm-out process has been underway here since 2012, and we expect each prospect is likely to be farmed-out to separate operators, due to their diverse nature. A successful Barryroe farm-out could also trigger deals here, as appraisal drilling in Barryroe would bring access to a rig in the basin. Lansdowne’s target to start exploration drilling in 2014 is still achievable, but is dependent on these farm-outs concluding imminently.
Valuation: Favourable terms key to value
We estimate that Lansdowne is currently trading at a low EV/2C of $0.89/boe, based on Barryroe alone. A farm-out deal in Barryroe, similar to that delivered by Rockhopper in its comparable Sea Lion field (where $5/boe was achieved), would therefore clearly unlock value. We must wait to see what terms can be reached, but for now this is clearly the single biggest share price catalyst we need to consider.
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