The Company had a very diverse portfolio in the oil and gas sector both geographically and in conventional and unconventional assets. Xtract undertook a strategic review in 2010 and decided to rationalise the asset portfolio in order to focus on more traditional oil and gas portfolio that if successful could add value to the Company in the near term. The objective was to get wells drilled on the Dutch and Danish prospects whilst reducing the commitment exposure in Turkey and the Kyrgyz Republic. The exit from both Turkey and the Kyrgyz Republic allowed the Company to focus its efforts on the Dutch and Danish prospects.
In the Dutch sector of the North Sea, Xtract, through its wholly owned subsidiary Elko Energy, currently holds an overriding royalty agreement with Chevron and TAQA over their respective 48% and 12% working interests in the Dutch offshore blocks P1 and P2. By pursuing the sale of the Dutch acreage to Chevron in exchange for a royalty agreement this allowed the Company to dedicate its financial resources on participating in the drilling of the ‘Luna’ well in Denmark.
Chevron decided to drill the P2-10 appraisal well targeting an existing gas discovery on the P2 block and one of the main objectives was to evaluate commercial hydrocarbon flow rates from an extended reach horizontal well within the Rotliegendes sandstone reservoir.
The P2-10 well was drilled by the Noble Byron Welliver jack up drilling unit, commencing on 9th January 2012. The well was designated by Chevron as “tight hole” in order to protect their proprietory technology being used to drill the well (“tight hole” meaning information regarding specific activity and progress is strictly confidential to the working interest partners). The well was sidetracked in April 2012 and well operations were complete in July 2012. The well remains classified as “tight hole” by Chevron and as such, no information regarding the outcome of the drilling activity has been released to the Company.
In Denmark, Xtract held a 33% working interest in licence 01/11 and in the adjoining exploration and production licence 02/05 in the central part of the Danish sector of the North Sea, through its wholly owned Danish subsidiary Elko Energy A/S. Norwegian Energy Company (Noreco) was the operator for the licences with the Danish North Sea Fund as the third partner.
The Partners selected a location for drilling the ‘Luna’ prospect on license 01/11, which had been chosen to test the Rotliegendes play. The Maersk Resolve jack up drilling unit spudded the ‘Luna’ well on 12th February 2012 and on 16thMarch 2012, the Company announced that the ‘Luna’ well had not encountered hydrocarbons. On 6th February 2013 it was announced that the Partners had jointly relinquished licences 01/11 and 02/05 in the Danish sector of the North Sea. Whilst the ‘Luna’ well was unsuccessful in discovering reservoir or hydrocarbons, shareholders have been able to participate in what was a very exciting potentially high reward prospect.
The small publically listed resource company sector remains under enormous pressure. New initial public offerings are rare and secondary placings are difficult to procure. In this challenging environment quality assets are easier to identify but obviously the key question is the capability to finance not only to purchase but to unlock value for shareholders. The Company is looking at a number of options in the resource sector and is confident that they will identify assets which in the course of time will restore and grow shareholder value.
Xtract Energy Plc