TIDMPANR
RNS Number : 5472H
Pantheon Resources PLC
28 July 2023
GENERAL TEXT AMMENT
The following amendments have been made to the "Operational
Update" announcement released on 28/07/23 at 07:00 under RNS No
4873H.
Change of "$6-$8 /bbl ANS" to "$6-$8 /bbl" and "18 mmbbl ANS" to
"18 mmbbl"
All other details remain unchanged.
The full amended text is shown below.
28 July 2023
Pantheon Resources plc
Replacement Operational Update
Pantheon Resources plc ("Pantheon" or the "Company" or the
"Group"), the AIM-quoted oil company developing its 100% working
interest in the Ahpun and Kodiak Fields with expected Ultimate
Recovery ("EUR") of approximately 2 billion barrels of contingent
resources of marketable liquids adjacent to transportation and
pipeline infrastructure on State Land on the Alaska North Slope, is
pleased to provide an operational update and refined management
estimates of preliminary development costs for the Ahpun field.
Highlights
-- Pantheon expects to receive an Independent Expert Report from
Netherland, Sewell & Associates on recoverable resources from
the Kodiak field in August 2023.
-- Planned date of September 2023 for mobilisation of workover
rig for conducting the frac of the Shelf Margin Deltaic Zone.
-- Management modelling of the economics for 20 well development
pads estimate robust returns with valuations of $6-$8 /bbl and
rates of return of 33%-53% at ANS prices(1) of $70-$80 /bbl ANS
respectively.
-- Analysis of the fluid composition from the Alkaid-2 test
indicates that the reservoir pressure is below the bubble point and
therefore there is free gas in the reservoir, but no free gas
cap.
Independent Recoverable Resource Estimates
Netherland, Sewell & Associates ("NSAI") is presently
completing its Independent Expert Report ("IER") on the Kodiak
field and is expected to provide its independent assessment of the
recoverable resources from Kodiak during August 2023. Following
completion of the Kodiak IER, NSAI will prepare an IER on the
Alkaid Zone within the Ahpun field which the Company estimates will
be finalised in autumn 2023.
Alkaid-2 Shelf Margin Deltaic Test
The primary contractors have now confirmed availability of
sufficient pumping horsepower at acceptable service rates, and a
suitable workover rig has been identified, which, subject to
execution of contracts, would have a planned date for mobilisation
in September 2023. However, the precise start-up of operations will
be refined nearer the time.
The Alkaid-2 re-entry is designed to gather the best possible
reservoir fluid samples for pressure-volume temperature ("PVT")
analysis and to test the improvements in the frac design discussed
in recent Company webinars.
Pantheon Executive Chairman, David Hobbs, said: "Netherland
Sewell and Associates have advised that they require a little more
time to incorporate all of the additional acreage and the newly
developed understanding of the reservoir fluid composition. We
support their desire to provide the most robust report possible and
are happy to allow further time. We are pleased to be on track to
begin the Alkaid-2 re-entry during September/October as originally
planned."
Well Pad Level Costs and Economics - Management Estimates
(2)
In recent webinars, management has outlined the factors
supporting its modelling, including estimates for individual wells
costs of $13 million (in 2023 real terms) for drilling and
completion of a multi-stage fracked, 10,000 feet ("ft") lateral
production well in a development scenario.
Preliminary estimates of the costs to build each well pad,
capable of supporting a minimum of 20 wells (15 producers and 5
injectors), are less than $5 million each. Costs for upgrading the
existing production facilities installed on the Alkaid well pad in
2022 (including chiller units for liquids recovery from the gas
produced in association with the oil) are estimated at $20 million.
Growth in capacity is estimated to cost less than $1 million per
1,000 barrels per day ("bpd") based on the Company's experience
with the initial unit. Cost for the hot tap into the Trans Alaska
Pipeline System ("TAPS") main oil pipeline is estimated to be $20
million. Pantheon will design the connection with sufficient
capacity to handle the entire production of Ahpun and Kodiak,
anticipated to reach more than 200,000 bpd of marketable liquids at
peak. Operating cost estimates amount to some $7 million per year
per pad at peak production.
Modelled results for the first 20 well pad (including the one
off cost of the TAPS tie in) with an EUR of 18 mmbbl and peak
production of 8,000 bpd of marketable liquids illustrate the
following results:
NPV10 ($70/bbl constant real ANS Price): $103 million with 33% IRR
NPV10 ($80/bbl constant real ANS Price): $150 million with 52% IRR
These well pad level economics anticipate a cash sink for the
first pad of some $70 million. However, allowing for potential cost
over-runs on the initial wells, corporate overheads and the optimum
development being based on simultaneous operations on the first two
pads, management estimates are for up to $350 million of funding
required to achieve financial selfsufficiency, as previously
outlined. This figure also incorporates three appraisal wells on
the Kodiak field prior to its FID, expected in 2028. The estimates
demonstrate considerable flexibility in optimising the funding
requirements based on the cost of financing and the Company's
determination to minimise value dilution for existing shareholders
between now and achieving financial self-sufficiency.
Jay Cheatham, Pantheon CEO, added: "Sharing our cost estimates
allows investors to understand the robust economics that our Ahpun
development can deliver. When staged development proceeds, adding
new pads and production capacity funded from the cashflows of the
early pads, the modelled returns demonstrate why we are confident
in our ability to achieve our targeted objective of delivering
sustainable market recognition of $5-$10 per barrel of recoverable
marketable liquids by 2028."
Alkaid-2 Well Test Results - Reservoir Fluid Composition
The Company is pleased to share the results of its recently
completed analysis of the fluid composition from the Alkaid-2
production test. This suggests that the reservoir pressure is below
the bubble point and there is therefore free gas in the reservoir
and is likely not a result of a free gas cap. Rather, the gas is
distributed throughout the pore space. This analysis has now been
incorporated into the SLB Static and Dynamic Models. Further
details can be found in the Appendix below.
Pantheon Technical Director, Bob Rosenthal, said: "It has
required some six months of painstaking technical analysis and
consideration of all valid technical theories to develop an
understanding and to identify analogues for the fluid composition
that was delivered by the Alkaid-2 flow test. We are grateful to
Geomark, SLB, Baker Hughes AHS, eSeis, NSAI and others for the
collaborative effort that has moved us forward along our path to
successful development of the Ahpun and Kodiak Fields."
-S-
Further information, please contact:
Pantheon Resources plc +44 20 7484 5361
David Hobbs, Executive Chairman
Jay Cheatham, CEO
Justin Hondris, Director, Finance
and Corporate Development
Canaccord Genuity plc (Nominated
Adviser and broker)
Henry Fitzgerald-O'Connor, James
Asensio, Gordon Hamilton +44 20 7523 8000
BlytheRay
Tim Blythe, Megan Ray, Matthew
Bowld +44 20 7138 3204
Notes to Editors
Pantheon Resources plc is an AIM listed Oil & Gas company
focused on developing the Ahpun and Kodiak fields located on the
North Slope of Alaska ("ANS"), onshore USA where it has a 100%
working interest in 193,000 acres. These fields support expected
ultimate recovery of contingent resources amounting to some 2
billion barrels of marketable liquids to be delivered through the
Trans Alaska Pipeline System ("TAPS"). Pantheon's stated objective
is to deliver a sustainable market recognition of a value of
$5-$10/bbl of recoverable resources by end 2028. This will require
targeting Final Investment Decision ("FID") on the Ahpun field by
the end of 2025, building production to 20,000 barrels per day of
marketable liquids into the TAPS main oil line through a hot tap,
and applying the resultant cashflows to support the FID on the
Kodiak field by the end of 2028.
A major differentiator to other ANS projects is the close
proximity to transport and pipeline infrastructure which offers a
significant competitive advantage to Pantheon, allowing for
materially lower capital costs and the ability to support the
development with a significantly lower pre-cashflow funding
requirement than is typical outside the US lower 48 states.
Appendix
(1) ANS Price is the price of Alaska North Slope crude loaded at
Valdez and delivered to a US West Coast Refinery.
Following extensive analysis and comparison with analogous
reservoirs elsewhere in the world, management believes that it is
possible to discount a free gas cap in the Ahpun field as a valid
explanation for the well performance. Instead, the most likely
explanation for the persistently higher than anticipated production
of gas is that the pressure in the reservoir is, at least at its
most up dip locations, below the bubble point - the pressure at
which gas breaks out of solution. This has likely occurred because
the reservoir fluids reached an equilibrium (at bubble point) at
the maximum depth of burial and, through subsequent uplift over
geological time, the reservoir pressure is no longer above the
bubble point.
The quality of the reservoir rocks has not permitted the gas to
accumulate in the crest of the structures and it therefore exists
in discontinuous gas bubbles surrounded by oil and water locked in
the matrix of the reservoir. As wells are produced, the pressure
drop will cause the gas bubbles to expand, providing the
unexpectedly high levels of reservoir energy that caused the wells
to flow without any indication of requiring gas lift.
This interpretation of the well results supports the Company's
conservative assumption that production wells will deliver the same
compositional mix in terms of oil, condensate, NGLs and natural gas
as observed in this flow test. This has been applied across the
portfolio, including in the work conducted by SLB in constructing
the static and dynamic models that Pantheon will use in its
development planning work.
* Indicative Field and Individual Well Economics are derived by
management on a conceptual development model for illustrative
purposes only. The Directors assess the fields as being commercial
and this is the reason the Company is seeking development approvals
and to achieve FID. However, projections of value depend on factors
including but not limited to expected oil prices, equipment and
service costs, well outcomes, funding risk, fiscal terms and
scheduling of investments.
The informat ion contained within this announcement may be
considered inside information prior to its release.
Cautionary Statement: Certain statements and estimates contained
in this announcement carry an associated risk of accuracy as such
statements and estimates are based upon projections made from
information available at the time of making such statements. Actual
results could differ materially from expectations or estimates set
out in such statements. Among other factors, this could be as a
result of changes in economic, market, engineering, fiscal and
political factors, the success of future drilling and geological
success, the risk of future drilling changes in the regulatory
environment and other government actions, funding risk and
assumptions, fluctuations in the price of oil and exchange rates,
and business and operational risk management.
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