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Enegi Oil able to cover cost of its share of Fyne development, broker says

Friday, July 5, 2013 8:36
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Enegi Oil (LON:ENEG) will be able to pay for its share of the Fyne field development costs without dilution, according to Shore Capital.

The company is set to acquire a 25% stake in the North Sea oilfield following a deal with Antrim Energy (LON:AEY).

Fyne’s proposed FPSO – floating production storage and offloading – development was shelved earlier this year as envisaged costs rose to uneconomic levels.

But, Enegi and its partner AB Technology (ABT) are now working on a new development using ABT’s unmanned production buoys. Once a new development plan has been signed off by the Department of Energy & Climate Change (DECC) Enegi and ABT will have earned a 50% interest in Fyne.

Fyne has just shy of 10mln barrels of oil reserves and through testing it has flowed 4,000 barrels per day.

In a note Shore Capital analyst Craig Howie highlighted that Fyne could be in production by 2016, and Enegi believes it can fund it participation.

“Enegi is confident that project finance can be secured for the production buoy and is already working with its advisors to develop debt facilities to be secured against reserves and equipment at Fyne,” the analyst said.

“Importantly, we therefore anticipate that Enegi will be able to finance its pro rata contribution to development costs without dilution at the corporate level.”

Howie says the small offshore discovery provides an excellent opportunity to show that commercial production can be achieved with the application of the proprietary buoy technology.

As such, this latest news is very positive as it confirms Enegi can pursue low cost and low risk reserves in partnership with ABT, he adds.

The analyst also points out that Enegi expects to see a significant interest in the buoy technology as a development solution.

“We believe that the proposed farm-in (Enegi’s first as part of its recently announced joint venture with ABT) provides tangible evidence of the company’s ability to leverage ABT’s proprietary development solution to access proven reserves in otherwise marginal fields, at very low entry cost.

“The ABT joint venture provides the opportunity for highly accretive reserve additions, in our opinion; Fyne is a proven, undeveloped discovery which contains 2P reserves of 9.9mmbbl (million barrels).

“Through the joint venture, Enegi will acquire net reserves of 2.5mmbbl by funding the costs of the revised FDP. With recent North Sea asset deals implying average reserve values in the region of US$15/bbl, we expect Enegi to acquire a very valuable interest in Fyne.”

Story by ProactiveInvestors


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