Mediterranean Oil on track

Mediterranean Oil & Gas is an attractive Italian energy play.

October 6, 2009

In terms of the number of licences, Mediterranean Oil & Gas (MOG) is number three in the oil and gas industry in Italy. It has 19 production concessions covering over1,700 sq km plus 13 exploration permits in a total area of over 2,000 sq km. MOG’s gas output comes from a number of onshore wells and the sharp fall in revenues in the first half of 2009 is blamed primarily on lower average gas prices under its largest gas supply agreement. But production should be fairly stable: as production from older wells decline, newer ones are coming on-stream.

IC TIP: Buy at 51p

But investor interest in MOG concentrates on the development of two big projects, Ombrina Mare (100 per cent working interest and operator) and Guendalina -20 per cent working interest with ENI as operator. Both fields are offshore Italy in the Adriatic and have proven and probable reserves. In the case of Ombrina Mare, these reserves are estimated to be 20m barrels of oil a day plus gas. Production there is expected to start in 2012 once all development wells have been drilled. MOG expects output to rise progressively to 5,000 to 7,500 barrels of oil a day plus 3.5m cubic feet of gas. First gas production from Guendalina is scheduled to begin in 2010.

But don’t forget MOG’s other untapped exploration interests. The most interesting one is a 90 per cent interest in four blocks offshore southern Malta and covers over 5,700sq km. The geology is said to be similar to Libya and Tunisia and a farm-out deal can be anticipated.