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Mediterranean Oil & Gas expands Sicily Channel footprint

Mediterranean Oil & Gas (MOG) has acquired a 40% interest in an exploration study agreement for three blocks in the Sicily Channel, north of Malta.

The remaining 60% of the licence is held by Capricorn Malta, a subsidiary of Cairn Energy (CNE), which entered into the two-year agreement for blocks one, two and three of Malta area three in December 2012.

"This enables us to expand our footprint offshore Malta ahead of our exploration drilling in area four later this year as Mediterranean continues to geographically diversify exploration activities and capital spend," commented Mediterranean chief executive Bill Higgs, adding that he was "very pleased" to have completed the deal.

"We look forward to working with Cairn to evaluate the exploration potential of blocks one, two, and three of area three, which we believe could mirror the exploration opportunities demonstrated elsewhere in the Sicily Channel."

The licence allows for geological studies, reprocessing of existing 2D seismic data, acquisition of new 2D seismic data and limited capital works.

It could be extended for a further year for 3D seismic acquisition and a production sharing contract could also be negotiated.

Analyst view

"[Wednesday's] announcement of the acquisition of more acreage in Malta alongside Cairn can only be good news, albeit modest," commented VSA Capital analyst Malcolm Graham-Wood.

"I like what Bill Higgs is doing at the company and the more diversification they do from Italy the more I like it," he said.

However, he added: "It's just a shame that Italy [doesn't] realise that they are strangling the goose that lays the golden eggs," referencing delays associated with Mediterranean's Italian Ombrina Mare project.

Earlier in July, Mediterranean's share price plummeted following a request by the Italian government for the company to complete an 'Autorizzazione Integrata Ambientale', an integrated environmental authorisation.

The company said that this was just one of a number of "lengthy and continuing delays" from the government in granting approval of the project's Environmental Impact Assessment.