'Given the technical risks associated with any further investment, it was decided that the Company's capital is better spent on the other assets held by Europa'. Image by Wirestock via iStock
Europa Oil & Gas (Holdings) PLC has terminated its royalty agreement with BritRNG Ltd. for Whisby 4 in Lincolnshire, England, saying natural decline has rendered the producing well unprofitable for Europa.
"Recently the Agreement has not generated any income for the Company and further investment is required to potentially return the Agreement to a cash-generating arrangement", oil and gas exploration and production company Europa said.
"Given the technical risks associated with any further investment, it was decided that the Company's capital is better spent on the other assets held by Europa".
Whisby 4 is one of six wells put into production in the Whisby field under license 199, according to information on field operator BritRNG's website. Whisby 4 is the only active producer with a rate of about 50 barrels of oil per day (bopd), while Whisby 6 is awaiting a workover to reinstate similar production, BritRNG says.
"The potential of the field is still undetermined. No systematic and integrated geological and reservoir engineering studies have been conducted since BP departed the block in the 1980's", BritRNG says on its website. "Ongoing studies by BritNRG are aimed at identifying further development opportunities".
Whisby's production, which has reached 860,000 barrels in total, is from a carboniferous sand called the Rough Rock or Basal Sandstone, according to BritRNG. "It varies in thickness between 0.8 and 4 meters, is of very high quality [100 percent Net to gross with permeability in the 100's of MD] and capable of producing at rates in excess of 100bopd per well", it says.
BritRNG holds a 95 percent stake in license 199 while Terrain Energy Ltd. owns the remaining five percent. The license took effect November 1981 and is expected to expire October 2035, according to online information from the North Sea Transition Authority.
Europa said it does not accrue liabilities from the cancelation of the royalty agreement for Whisby 4 "since these have been written off by the parties to the Agreement".
"This has resulted in a £185,000 [$232,500] net gain to the Company's balance sheet", it said.
Europa chief executive Will Holland said, "The Whisby 4 well was drilled in 2003 and since then it has been producing on natural decline to the point where the original net profits interest agreement is no longer profitable for Europa".
"Given the uncertainties associated with any further investment in the Whisby 4 well, the Board decided that our capital is better spent on other projects that offer our shareholders a better value proposition", Holland added.
Earlier Europa and its Wressle partners saw the planning consent for an extension project in the field onshore North Lincolnshire canceled due to a Supreme Court ruling that regulators must consider Scope III emissions in Environmental Impact Assessments (EIAs).
"The Operator, Egdon Resources U.K. Limited, will now provide the NLC [North Lincolnshire Council] with an analysis of Scope 3 GHG emissions for the proposed development conducted by an independent third-party specialist company and request a new EIA screening opinion", majority owner Union Jack Oil PLC said in an online statement November 12.
The Department for Energy Security and Net Zero (DESNZ) issued October 30 a draft EIA guidance for oil and gas firms in light of the Supreme Court appeal decision. According to a statement from the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) on June 20, the Labor government decided not to appeal the decision in the Finch case, in which the Supreme Court nullified the Surrey County Council's planning permission for the Horse Hill oil development because end-use Earth-warming emissions had not been considered.
Expecting that the consultation would not conclude until spring 2025, OPRED said it was pausing environmental assessments, including ongoing ones.
Otherwise, operators would be "wasting time and money submitting environmental statements that do not contain the required elements", it said.