Circle Oil targeting Tunisian deal by year-end

Circle Oil is hoping to reach agreement by the end of this year on a farm-out deal, regarding its highly-rated assets offshore Tunisia.

The Irish-registered exploration firm is also actively sizing up a number of acquisition opportunities in Northern Africa.

Speaking directly after the firm’s AGM in Dublin last Friday, during which he delivered a bullish outlook on the company’s future prospects, Circle’s new chief executive Mitch Flegg said he would be hopeful of tentatively landing a development partner for the company’s Mahdia Permit, off the coast of Tunisia, by the end of this year.

Earlier, Mr Flegg told Circle’s assembled shareholders that doing a Tunisian deal — which would introduce a partner to fund further appraisal and exploration wells in the area — is one of management’s main priorities. It is too early to know how much of its 100% stake in Mahdia, Circle is willing to sell.

Last August, Circle’s market value enjoyed a €30m boost after early drilling results from Mahdia — the company’s first offshore asset — suggested recoverable resources of around 100m barrels of oil.

It has since been referred to as a “potentially transformational” find and a possible world-class asset.

“There’s a long way to go, but it’s a quality asset and we’re confident we’ll move it forward,” Mr Flegg said on Friday.

He added that interest levels are high among potential industry partners and that Circle is not having to market Mahdia as an investment option.

Asked about the quality of interested parties, he said that they have the wherewithal to “put their money where their mouth is”.

“Tunisia gives us the exploration running room we need as a company,” Mr Flegg said, adding that the company is awaiting formal approval for a three-year extension to its Tunisian permit, but expects delivery next month.

Last year’s drilling work at Mahdia cost Circle in the region of $55m (€49.5m), but the company is unwilling to fully expose itself to such project costs again.

Last month, Circle published a harsh set of annual results for 2014, which showed it went from an operating profit of $32.35m to an operating loss of $48.02m on the back of falling oil prices and writing off operations in Oman, which it has now exited.

The company is now only operating in three countries — Egypt, Morocco, and Tunisia — but sees scope to expand operations in each. Mr Flegg said the anticipated surge in consolidation and M&A moves within the global exploration sector is throwing up “a big basket” of acquisition and investment opportunities and that Circle is actively looking at such prospects. He added that the company had left Oman on good terms, facilitating a possible return in the future if it so wished.

In Morocco, Circle is confident of seeing further production and revenue increases this year and next and is participating in ongoing dialogue with potential new customers. It is also looking at increasing the volume and price of contracts to third parties; and further evaluating resource levels in the north of the country.

Additionally, while the company has moved most of its senior management facilities to London, management reassured shareholders that it remains an Irish company and will stay registered in this country.