Ithaca Energy has signed an earn-in agreement with Challenger Minerals for the Hurricane discovery in the UK North Sea Block 29/10b, within the Ithaca operated Greater Stella development area.

Hurricane was discovered in 1995 by the well 29/10-4Z which tested the western lobe of a mapped structure and encountered light oil (41 degrees API) in a 62ft section of reservoir sands and no drill stem test was undertaken at that time.

The Hurricane appraisal well is being designed to confirm hydrocarbons in the eastern lobe of the structure characterized by high porosity (up to 30%) channelised Paleocene Rogaland sandstones.

On successful appraisal of Hurricane by the initial well, the intention is to drill a sidetrack ‘keeper’ well up structure in anticipation of future development and tie back to the Stella hub.

Under the earn-in agreement, Challenger is committed to pay a share of costs of the initial well in Block 29/10b.

In consideration for this commitment, the company is provided with an option, exercisable no later than 90 days following abandonment or suspension of the initial appraisal and any sidetrack well, to take an interest in Block 29/10b.

Challenger will pay 40% of gross Hurricane initial appraisal well costs in exchange for a 31% equity interest in Block 29/10b, thereby carrying a part of Ithaca’s share of all costs of drilling an initial appraisal well.

In addition, upon successful appraisal, the company will pay 40% of gross costs of a drill stem well test of any sidetrack.

All additional costs, including those for planned sidetrack drilling, will be apportioned such that Challenger will pay its 31% pro rata share.

The transaction is subject to agreeing turnkey terms with Applied Drilling Technology International for the provision of a suitable drilling unit and well management services.

Upon agreement of the turnkey terms and provision of a suitable rig, Ithaca anticipates that the appraisal well will be commenced in the fourth quarter of 2011.

Ithaca currently holds 100% equity interest in the Hurricane discovery and Block 29/10b.