Hot Features
Premium
Register for real-time alerts, custom portfolio, and market movers
3Legs Resources (LSE:3LEG) announced in a company update this morning that ConocoPhillips will be exercising is call option for three of its exploration concessions in the Baltic Basin region of Poland. Share prices has risen about 7% by midday on the London Stock Exchange.
What the Update Mean
3Legs entered into an agreement with ConocoPhillips in 2009 wherein the latter funded the initial explorations for shale gas in the Baltic Basin in return for call options in the amount of 70% equity interest in each of the projects as they became viable for production. ConocoPhillips will now become the operator of these three concessions, with 3Leg retaining 30% interest. The three eastern concessions in the Basin will be divested into a new entity arrangement between 3Legs and ConocoPhillips, continuing under the same partnership terms. ConocoPhillips will have until September 30th to exercise its 70% options on those concessions. With the exercising of their options, Conoco Phillips also now becomes the operator of the three western sites.
3Legs believes, although initial findings have determined the three eastern concessions to be less attractive from a capacity perspective, that they, nonetheless, have reasonable potential. The short term plan is to vertical drill at one of western concessions in the second half of 2012. Additional options for that concession and others in the western, eastern, and southern regions are at various stages of evaluation. Poland is considered to be the most likely prolific source of shale gas in Europe. As the exercising of ConocoPhillips options frees up some of 3Legs resources, 3Legs announced that the board is considering other potential opportunities to add to its portfolio. Although the company clearly wishes to continue its focus on exploration in Europe, it has not ruled out expanding into other regions.
Corporate Comment’s on Today’s Update
Peter Clutterbuck, 3Legs’ CEO, said, “We are very pleased that ConocoPhillips has exercised its call option in respect of our three western concessions in the Baltic Basin. Our objective all along has been to see ConocoPhillips exercise this option and this decision represents a very satisfactory conclusion to almost three years of cooperation in the exploration and appraisal of the Baltic Basin shales.” In addition he said that “During that period 3Legs Resources as operator has drilled a total of four wells in the Baltic Basin shale play and has safely and successfully drilled, fracced and tested the first two horizontal shale gas wells in Poland. We enjoy an excellent working relationship with ConocoPhillips.”
“Our Baltic Basin work programme for 2012 is focused on further defining the “sweet spots” within our western concessions, building on the conclusions learned from our 2011 drilling campaign. We are committed to taking the Baltic Basin programme forward from its current exploration phase and the focus from now on will be to drill wells in areas most likely to have the best potential to flow at commercial rates, while further refining frac design.”
Company Spotlight
3Legs Resources is listed in the Oil & Gas Producers category on the LSE, but it is somewhat unique in that it specializes in the development of “unconventional” oil and gas. Unconventional gas is different from conventional gas in that it is located in reservoirs that that are less permeable. This means that it cannot be extracted through “conventional” methods, such as fraccing. The three major types of unconventional gas resources are tight gas, coal bed methane, and shale gas. The company has chosen to focus on production of shale gas. 3Legs has 6 concessions in the onshore Baltic Basin in Poland, 3 explorations licences in southern Poland, and 2 licences in southwest Germany. The company is awaiting approval for 2 additional exploration licences in southern France.
Company Spotlight
↑ Official Company History
↑ Platts
↑ Oil Voice
↑ Fox Business
↑ Proactive Investors
↑ Official company information
