Summary

·         Ramco has agreed to acquire the Seven Heads interest held by Duke Energy Services Ireland Ltd (Duke Energy), following a decision by Duke Energy to focus on its core business in the mid wholesale market in Europe.

·         Ramco has acquired from Northern Petroleum plc its wholly owned subsidiary, Northern Exploration Ltd (Northern), which holds an interest in the Seven Heads GLU and the nearby Galley Head area.

·         Ramco and its partners have signed agreements with Marathon to enable gas from Seven Heads to flow ashore via Marathon’s Kinsale Head facilities.

·         Ramco and its partners have declared Seven Heads commercial, and are in the process of submitting an application for a Petroleum Lease to the Irish government.

Ramco takes increased stake in Seven Heads

Ramco has agreed to acquire Duke Energy’s 26% equity interest in the Seven Heads project. Heads Under the terms of the agreement to acquire Duke Energy’s equity, Ramco will pay Duke Energy US $7.5 million on completion and up to a further US $3 million based on production targets.

Ramco has acquired Northern Exploration Ltd for a consideration of £2 million in cash and £1 million in Ramco shares. Northern holds a 4% interest in Seven Heads and a 6.4% interest in Galley Head. Northern also has a Carried Interest Agreement with Sunningdale Oils (Ireland) Ltd (Sunningdale) under which it pays Sunningdale’s share of initial development costs on Seven Heads and Galley Head.

Under revised terms of the Carried Interest Agreement with Sunningdale, Ramco will pay Sunningdale’s share (1%) of all capital and operating costs incurred before the commencement of gas production from Seven Heads with a similar obligation in respect of the possible future development of an existing discovery in the Galley Head area. In consideration of the obligations undertaken by Ramco, Sunningdale will assign 0.6% of its interest in the Galley Head area to Ramco.

On completion of the Duke Energy and Northern transactions the partner interests in the Seven Heads gas project will be: Ramco (Operator) 86.5%; Island Petroleum Developments Limited (Island) 12.5%; and Sunningdale Oils (Ireland) Ltd 1%. Ramco has offered Island the opportunity to acquire its pro rata share of the Seven Heads interest to be acquired from Duke Energy.  If this offer is taken up in full Ramco’s interest will reduce to 82.1%. 

Following completion of the Northern and Sunningdale transactions, Ramco’s interest in the Galley Head area, which is 25 km north of Seven Heads, will increase to 77%.

All assignments of equity interest in the field are subject to approval by the Minister.

Seven Heads to tie back to Marathonplatform

Ramco and its partners in Seven Heads have signed agreements with Marathon allowing Seven Heads gas to be produced through Marathon’s Kinsale Head facilities which are located approximately 35 kms from Seven Heads. Once tied into Kinsale Head, Seven Heads gas will be transported to shore through an existing pipeline and will be delivered through existing facilities onshore. Under the terms of these agreements the Seven Heads partners will share the operating costs of the Kinsale and onshore facilities with Marathon. 

Under the agreements, Marathon is undertaking to make available firm capacity to process and transport 60 million cubic feet per day (MMCFD) of Seven Heads gas with the facility to increase that up to 100 MMCFD by agreement.

Seven Heads declared commercial

Access to the Marathon facilities has enabled the Seven Heads partners to declare Seven Heads commercial. They will submit an application to the Minister for a Petroleum Lease to supersede their current GLU. The Plan of Development is now in the final stages of preparation and will subsequently be submitted to the Minister for approval.

Subject to approval by the Minister, the development plan for Seven Heads involves re-completing well 48/24-5A, drilling additional wells and installing a sub-sea tieback to Marathon’s Kinsale Head facilities. 

Ramco is currently progressing negotiations for the sale of its Seven Heads gas.

Commenting on today’s announcement, Steve Remp, Executive Chairman of Ramco, stated:

“These transactions, together with the agreement to move gas through Marathon’s Kinsale facilities, substantially strengthen our position and allow us to fast forward the Seven Heads project to the benefit of our shareholders and partners. Our target is first gas before the end of 2003.”

“Seven Heads offers Ramco the opportunity to develop a substantial strategic presence in the Irish gas market, and enhances the prospects for the future development of other possible gas discoveries in the area, such as Galley Head.” 

“We are very pleased to have negotiated access to Marathon’s Kinsale Head facilities, as this both reduces the capital cost of the Seven Heads project and accelerates first production as construction and approval times can be significantly reduced.”

“We are reinvesting the proceeds from the sale of our producing interest in Azerbaijan in acquiring a dominant interest in Seven Heads and Galley Head. The resultant cash flow should put Ramco in a strong position to extract value from its existing portfolio of assets and to identify new opportunities with potential to create value.”

Fergal G. Murphy, President of Marathon International Petroleum Ireland Limited, stated:

“Marathon is very pleased with this agreement to provide the gas processing and transportation infrastructure upon which new facilities such as the Seven Heads gas field can be successfully developed.  The value of Marathon’s Celtic Sea infrastructure is enhanced while the capital investment required for the Seven Heads gas field development is minimised.  This results in a ‘win-win’ situation for Marathon and the Seven Heads partners.”

Peter Wilt, President and Chief Executive Officer of Duke Energy International (Europe) Limited, added:

“While we remain very interested in the Irish gas and electricity market, we are focusing in Europe on our core business in the mid wholesale markets and exiting our equity position in this development project. However, we look forward to the opportunity to participate in the marketing of Seven Heads gas which will bring a new source of supply to the Irish market.”

Enquiries:

Steve Remp     Executive Chairman

Dan Stover       Project Development Director

Ramco Energy plc

Tel: +44 (0)1224 352200

Email: jacqueline.christie@ramco-plc.com

Note to Editor

The Seven Heads Gas Lease Undertaking (GLU) lies in the North Celtic Sea Basin, offshore Ireland in part blocks 48/22, 48/23, 48/24, 48/27, 48/28, 48/29 and 48/30. Its centre is some 34 km southwest of Platform 'B' of the Kinsale Head field, 47 km from the nearest land at the Old Head of Kinsale on the Cork coast, and 61 km from the landfall of Marathon's gas pipeline from the Kinsale Head field at Power Head. 

Water depth over the structure is a fairly constant 101m to 104m.

Ramco and partners were awarded a GLU over the area in August 2001 and successfully completed testing their first appraisal well, 48/24-5A in October 2001. Prior to suspension, the appraisal well tested a maximum flow rate of 13.7 million cubic feet of gas per day from Upper Wealden sandstones. Since then, Ramco has been encouraged by the results of its technical work on the distribution and continuity of the reservoir and an independent engineer’s report which shows proven and probable recoverable reserves of over 300 bcf for the field, 263 bcf net to Ramco.

Reservoir

The Seven Heads reservoir is an east-northeast striking anticline approximately 35 km in length and 8 km in width.  Gas is contained within Upper Wealden sediments at a depth of approximately 915m. 

Development Plan

It is planned to develop Seven Heads with 6 development wells to be drilled in 2003.  Wells are expected to be drilled vertically to approximately 1.2 km using horizontal “drill through” christmas trees and to be up to 8 km apart, requiring approximately 29km of 8” diameter in-field flowlines to connect the wells to a collection manifold.

The collection manifold will combine flow from the 6 wells and discharge it into a 35 km 18” pipeline to the Kinsale “A” platform. 

The pipeline is expected to be connected to a new riser on the north side of the Kinsale “A” platform.  Gas will be processed to meet BGÉ pipeline specifications, and exported to shore through the existing 24” diameter export line.  Landfall will be at the existing Inch Terminal near Cork.