Dolphin Drilling Signs Multi-Well Drilling Contract with i3

March 19, 2020

Image Credit; Dolphin Drilling
Image Credit; Dolphin Drilling

Offshore drilling contractor Dolphin Drilling has signed a drilling contract for one of its semi-submersible offshore drilling rigs in the UK North Sea with oil company i3 Energy.

Bjørnar Iversen, CEO of Dolphin Drilling said the contract was for a program covering 2 wells plus sidetracks on i3's Serenity prospect for either the Borgland Dolphin or Blackford Dolphin rigs. 

The program is due to start not later than September 1, 2020 or as otherwise agreed between the parties and includes an option for additional wells on the Minos High structure and the Liberator West area in Block 13/23c. 

The contract is conditional on i3 confirming the availability of funds to satisfy its obligations under the contract 90 days prior to drilling start. Dolphin Drilling drilled 2 wells on the Liberator and Serenity prospect in 2019.

The successful relationship between Dolphin Drilling and i3 Energy has encouraged the two companies to agree to enter into this new contract, the mid and deep-water drilling contractor's CEO said in a social media post.

Iversen said: "We are extremely pleased to have been awarded this very important contract by i3 Energy under our 4 years Frame Agreement. This is a testament to the excellent relationship we have built, and further cement our strategic alliance. We are looking forward to again delivering a first-class operation to i3 Energy during their 2020 Drilling Campaign."

Dolphin to earn part of oil production revenue

In a separate statement on Thursday, i3 confirmed the signing of the drilling contract, adding that the minimum term would be for 82 days, with an option to extend for a period of 78 days

"i3's current minimum programme for the appraisal drilling consists of two appraisal wells on Serenity plus a sidetrack on each well, contingent on drilling outcomes, at a total expected gross cost of approximately US$33 million. The Option Programme would include wells on the Minos High structure and the Liberator West area in Block 13/23c," i3 Said.

The oil company has also shared some interesting details on the terms of the deal with Dolphin.

Namely, i3 has agreed that Dolphin will earn up to a 10% economic interest (the "Dolphin Interest") in offshore Block 13/23c via a Net Revenue Sharing Agreement (the "NRSA") in exchange for Dolphin forgoing its profit margin above its Opex, up to a maximum amount of US$14.4 million. 

Accordingly, the Dolphin Commitment will cover approximately 22% of the total expected gross costs of each of the 2020 Campaign and Option Programme.

The net revenue is the revenue from the sale of hydrocarbons from Block 13/23c less all costs for developing and producing those hydrocarbons. 

Once production from Block 13/23c has been achieved, and after i3 has been repaid 200% of all Block 13/23c development Capex costs from associated petroleum revenues, Dolphin will receive a share of field income equal to Dolphin's Interest multiplied by Net Revenue. 

Any Dolphin profit margin paid by i3 during the 2020 campaign at its election will decrease the Dolphin interest on a proportional basis. 

At any time prior to the approval by the UK Oil and Gas Authority (the "OGA") of a field development plan ("FDP") which includes production wells in the 13/23c Block, i3 has the right to purchase the Dolphin Interest by paying Dolphin 125% of the Dolphin Commitment. 

Following the approval of a Block 13/23c FDP by the OGA to develop more than 25 MMbbls of reserves from production wells on that block, Dolphin has the right to sell the Dolphin Interest to i3 for the Dolphin Commitment plus interest accrued at a rate of 8% per annum, and i3 has the obligation to purchase the Dolphin Interest upon Dolphin exercising such right.

i3's management carries 197 MMbbls P50 stock tank oil initially in place (STOIIP) for Serenity which, conservatively modelled as a stand-alone development, demonstrates an after-tax NPV10 break-even at US$20 per barrel Brent pricing.

i3 said it was making good progress in its farm-out process to fund its 2020 drilling program. The data room remains open and companies continue to actively evaluate the opportunity. i3 will provide further updates to the market as discussions progress.

Majid Shafiq, CEO of i3 Energy commented: "We are delighted to have executed a drilling contract with Dolphin Drilling for our Summer 2020 appraisal programme. Dolphin performed exceptionally well in our 2019 campaign, drilling our wells on time and on budget and without any significant health, safety or environmental issues. Their support announced today not only contributes a significant component to the funding structure for our upcoming drilling campaign but also demonstrates the quality of our licenses."

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