TIDMPANR
RNS Number : 6818F
Pantheon Resources PLC
19 May 2017
19 May, 2017
Pantheon Resources plc
Operational Update & investor conference call details
Pantheon Resources plc ("Pantheon" or "the Company"), the
AIM-quoted oil and gas exploration company with a working interest
of 50%-58% in several conventional projects in Tyler and Polk
Counties, onshore East Texas, provides an operational and corporate
update.
Shareholder presentations
-- Chief Executive, Jay Cheatham will from 12.00pm today
commence a series of non-deal roadshow meetings with shareholders,
providing an update on the Company's present operations and plans
for 2017.
Operations
Gas processing agreement
-- Definitive terms agreed with Kinder Morgan, the US's largest
energy infrastructure company, to build and operate a 15mmcf/d
dedicated gas processing facility for Polk County operations.
-- All permits, rights of way, pipeline and the tap in point
works have been completed and paid for. Based upon modelled well
data, Pantheon believes it should be able to achieve operating and
transportation costs in the lower quartile of North American
producers, below $5 per boe.
-- A modelled 15mmcf/d gas processing facility running at
maximum throughput at today's pricing(1) after taking account of
the terms of the accelerated payback arrangement concluded last
year, could generate over $1,600,000 a month of free cash flow net
to Pantheon (after royalties and production taxes).
-- The objective is to be in production by August/September 2017.
Update on VOBM#4 well, Tyler County, onshore East Texas
(Pantheon 50% working interest) Wilcox formation
-- The VOBM#4 well was designed as a large step out well to test
the extent of the Eagle Ford sandstone in Tyler County. After
encountering flowing hydrocarbons in the shallower Wilcox formation
the Company attempted to complete the well as a Wilcox
producer.
-- As detailed in the Company's interim statement on 31 March,
2017, operations within the VOBM#4 well were significantly delayed
due to the integrity of pipework within the wellbore being
compromised by the failure of a liner hanger to seal correctly.
Multiple cement squeeze jobs were undertaken and were ultimately
successful in restoring wellbore integrity.
-- An independent reservoir engineering consultancy was
contracted by the operator to undertake an analysis of the wellbore
conditions following the multiple cement squeeze jobs and to advise
on the optimum procedures for successful flow testing. Analysis
suggests that cement from the multiple squeeze jobs may have
compromised the formation in the immediate area surrounding the
wellbore. This is believed to be a localised issue directly as a
result of the intervention of the cement and does not in any way
impact the prospectivity of the reservoir. Accordingly it has been
concluded that the most effective remediation technique is to
retrace partially back up the hole and to drill sidetrack to
present a clean wellbore for production testing. Planning for the
proposed sidetrack is presently underway and operations will
commence as soon as equipment and services are available.
-- The third party consultants also concluded that based upon
analysis of well logs and drilling data that the Wilcox in this
location has outstanding potential.
Update on VOBM#2H well, Polk County, onshore East Texas
(Pantheon 58% working interest)
-- Operations to complete and flow test VOBM#2H have been
complicated because of the requirement to re-enter the suspended
horizontal wellbore and to drill a deviated well path from within
the original lateral section, causing a number of technical
challenges.
-- Third party reservoir and completion consultants were
contracted to advise on the optimum completion and testing
methodologies given the wellbore constraints. Analysis suggests
that the wellbore has suffered skin damage, most likely caused by
the low drilling penetration rates pulverizing the hard sandstone
into very fine particles during the drilling of the deviated
section in the target horizon. Skin damage is not an uncommon
consequence in horizontal drilling and Pantheon and Vision are
presently working with the consultants to determine the optimal
completion technique.
-- The third party consultants have assessed well logs, seismic
and other well data as part of their analysis and have concluded
that the VOBM#2H well has the potential to be an upper tier well,
subject to successful completion and flow testing. Well logs and
seismic signatures compare favorably with those of the VOBM#1 and
nearby Double A Wells field wells.
-- The VOBM#2H well is located between VOBM#1 and VOBM#3 wells,
both of which are commercial discoveries. The well exhibits
excellent log and seismic responses. Pantheon believes the
potential for this well to be significant.
-- Final analysis is presently being concluded and the Company
anticipates that the likely treatment will most likely be either an
aggressive acid job or a small fracture stimulation. Work will
commence as soon as the equipment is available.
Corporate
-- As at 17 May, 2017 the Company has cash reserves on hand of
$4.7m and is funded for present operations. An additional $0.6m has
already been paid to cover pipeline, rights of way and surface
facilities for the gas processing facility.
Economics
-- A modelled 15mmcf/d gas processing facility running at
maximum throughput at today's pricing(1) after taking account of
the terms of the accelerated payback arrangement concluded last
year, could generate over $1,600,000 a month of free cash flow net
to Pantheon (after royalties and production taxes).
-- The VOBM#1 well alone, at tested flow rates on a 12/64ths
choke could generate c.$700,000 free cashflow per month to Pantheon
on the same terms. Such a well should pay back the cost of drilling
a modelled Polk County vertical well within three and half months,
consistent with management's objective of working towards a
self-financing drilling programme, minimizing equity dilution.
Larger choke apertures can produce disproportionately larger flow
rates.
-- For perspective, a stand-alone Wilcox well is estimated to
cost $2.5m on a 100% basis, and a vertical Eagleford Sandstone well
in Polk County is estimated to cost $4.5m on a 100% basis.
Investor conference call
-- The company understands that shareholders may have questions
following today's update and accordingly an investor conference
call has been arranged for 10.00am Monday, 21 May, 2017. Investors
can email any questions to contact@pantheonresources.com prior to
the call, as many as practicable of which will be answered by Jay
Cheatham. Dial in details are as follows +44 (0) 3333000804. PIN:
72576154#.
-- An updated company presentation will be available on the
Company's website prior to the investor conference call
(http://www.pantheonresources.com/).
Jay Cheatham, CEO of Pantheon Resources said:
"I am very pleased to announce that definitive terms have been
agreed with Kinder Morgan to build and operate a 15mmcf/d gas
processing facility in Polk County. This is a key moment for
Pantheon in its progression to production revenues and supports our
objective to self-fund operations.
"The issues we have encountered have not impacted the potential
of the project in any way; rather they are operational only and
specific to the individual wellbores. In fact, the Wilcox discovery
has the potential to add significant additional value for
shareholders and the potential for the Eagleford is
undiminished.
"A side-track of the VOBM#4 well in Tyler County is the prudent
next step. During drilling, the Wilcox flowed hydrocarbons into the
well bore continuously all the way to total depth despite very high
mud weight. This is a very promising sign. The multiple cement
squeeze jobs performed to repair the liner hanger seal leak appear
to have compromised the formation in the immediate area of the
wellbore. However, based on log analysis and drilling data we are
confident the sidetrack could be a superb Wilcox well with great
additional potential on our existing acreage.
"The VOBM#2H well presented a unique set of issues associated
with horizontal drilling through the hard Eagle Ford sandstone at
low penetration rates. Third party consultants confirmed our belief
that VOBM#2H has the potential to be an outstanding well, which
compares favourably with better wells in the analogous Double A
Wells field. The issue is how to best deal with well bore skin
damage from silica fines. This is a mechanical issue which we
believe is solvable.
"The geology in Polk and Tyler County has actually improved with
the Wilcox discovery. Each well has found hydrocarbons. In fact,
VOBM#4 found 2 previously unmapped zones. Despite the operational
challenges faced, our enthusiasm is undiminished and the size of
the prize for shareholders has increased."
Footnote
(1) Assumptions: $49 per barrel oil (WTI), $3.20 mmBTU gas,
calculated after royalties and production taxes.
Glossary
mmcf/d million cubic feet per day
mcf/d thousand cubic feet per day
mmBTU million British thermal units
Further information:
+44 20 7484
Pantheon Resources plc 5361
Jay Cheatham, CEO
Justin Hondris, Director, Finance
and Corporate Development
Stifel Nicolaus Europe Limited (Nominated +44 20 7710
Adviser and broker) 7600
Callum Stewart
Ashton Clanfield
Nicholas Rhodes
+44 20 3727
FTI Consulting 1000
Ed Westropp
James Styles
For further information on Pantheon Resources plc, see the
website at: www.pantheonresources.com
In accordance with the AIM Rules - Note for Mining and Oil &
Gas Companies - June 2009, the information contained in this
announcement has been reviewed and signed off by Jay Cheatham, a
qualified Chemical & Petroleum Engineer, who has over 40 years'
relevant experience within the sector.
This announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's
website
This information is provided by RNS
The company news service from the London Stock Exchange
END
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