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Corrib operator eyes expansion and tax-free cash

By: 
Gavin McLoughlin - Irish Independent

Vermilion Energy considers exploration of Corrib Deep prospect to boost potential life of 'world-class' gas field

The incoming operator of the Corrib gas field has outlined plans to expand the project, while telling investors that it doesn't expect to pay tax on proceeds from the field.

Vermilion Energy said opposition to the project had "now largely dissipated".

It said it had acquired $1.3bn (€1.15bn) in so-called "tax pools" as part of the deal to take over operatorship.

These are assets derived from historical losses on the project, which can be used to offset tax payments.

"As a corporate transaction, the Corrib acquisition transferred the associated tax pools to Vermilion. Post-acquisition capital expenditures generated additional tax pools," a presentation to investors earlier this week said.

"With current available tax pools totalling [circa] $1.3bn, we do not expect to pay income taxes related to cash flows generated from the Corrib project," it said.

The presentation to investors said the absence of royalty payments, low operating expenditure and minimal ongoing capital expenditure meant the project has strong cash flows.

But it is considering a boost in capital expenditure over the coming years to try and find more gas.

The company said it will look at re-drilling particular wells that had bypassed recoverable gas. It's also considering exploring a prospect known as 'Corrib Deep', which is deeper than the existing field.

In addition, Vermilion said it would look to do deals with other oil and gas companies exploring in the waters around Corrib, either by allowing those companies to use the Corrib infrastructure to transport gas, or by buying stakes in those companies.

Vermilion is taking over after Shell exited the field, selling its stake to a Canadian pension fund. As part of that deal Vermilion's stake in the field is to reach 20pc.

 

The pension fund and Statoil are the other shareholders.

Corrib accounts for 95pc of Ireland's domestic gas production and 60pc of the gas consumed. After the Kinsale fields shut down production in 2020 or 2021, it will be the only Irish field producing gas.

"Corrib really is a world-class gas field," Darcy Kerwin, managing director of Vermilion's Irish business unit, told investors, adding that the company saw chances to boost efficiency at the gas-processing plant.

"As we've spent time at the plant over the last couple of months getting ready to take over operatorship, we've identified what we think are a large number of low-hanging-fruit-type operational projects that we're excited to go and implement when we become operator.

"They kind of range from simple things like just optimising the well-testing frequency... to better optimising the maintenance and the turnaround planning.

"I'm confident the more time we spend there, the more opportunities we'll be able to identify."

Mr Kerwin said the community around the gas plant "are now quite supportive", with a lot of workers living in the local area.

He said he and a colleague hosted a dinner for 15-20 families who live close by, and that the "resounding takeaway" was that the people who live around the plant are " quite reasonable and are just looking for transparency from the operator".

Posted Date: 
3 December 2018