Kilkenny-based exploration group Island Oil and Gas will drill a well in the Seven Heads gas field off the coast of Kinsale after reaching an agreement with its partner Marathon.
Announcing the project yesterday, Island said it would drill the well in April as part of a three-well programme agreed with Petrolia Drilling in October. Island will fund the whole cost of the well in return for increasing its stake in the unappraised part of the Seven Heads lease from 12.5 per cent to 55.75 per cent.
The hole being drilled is to the west of the 48/24-6 production well, a site the company says has so far encountered some of the best producing gas sands in the field. The outcome will determine whether the field could be expanded.
Marathon only became involved in the project last week when it completed the acquisition of an 86.5 per cent interest in the Seven Heads Gas Field for £5.7 million (€8.3 million) in cash from Scottish exploration group Ramco. Under the terms of yesterday's agreement, Marathon has the option of increasing its stake in the unappraised area to a maximum of 50 per cent by paying 13.5 per cent of the cost of drilling and testing the well. However this offer is good only up to four weeks before the spud date of the well.
Island will operate the well during the drilling period but operatorship will revert back to Marathon once the programme is complete. Paul Griffiths, chief executive of Island, welcomed Marathon's involvement in the project, saying the company had an "unrivalled" history of experience and expertise in producing gas from the Celtic Sea.
Island, whose shares began trading on London's Alternative Investment Market (AIM) in December 2004, saw its losses widen to £101,000 (€147,253) in the year to the end of last July.
