TIDMPATH
RNS Number : 2142E
Path Investments plc
07 February 2018
7 February 2018
Path Investments plc
("Path" or the "Company")
Update re Proposed Farm-in Agreement
Path Investments plc (TIDM: PATH), is pleased to provide the
following update in relation to the Company's conditional
acquisition of a 50% participating interest in an onshore producing
conventional gas field, the Alfeld-Elze II Licence and Gas Field in
Germany, located some 22 km south of Hannover (the "Proposed
Transaction").
As previously announced, the Company intends to undertake a fund
raising and to seek admission of the Company's ordinary shares to
trading on the AIM Market of the London Stock Exchange plc ("AIM")
during Q1 2018 in conjunction with the completion of the Proposed
Transaction.
The Alfeld-Elze II Licence and Gas Field (the "Field")
The licence on which the Field is situated is a production
licence covering 64.6km(2) (the "Licence") and was previously split
in two, with the two separate prior licences historically owned and
operated by Mobil and Preussag. The single combined Licence was
issued to 5P Energy GmbH ("5P Energy"), the current 100 per cent.
owner and operator of the Licence, in 2012 and expires on 14 March
2041.
The Field is a conventional Rotliegend sandstone gas reservoir,
with 2D seismic coverage, existing production, well control and
good access to infrastructure. The wells are relatively shallow,
with a total depth of circa 1,500 metres, with a range of gross
reservoir penetration intervals from approximately 90 to 260
metres. Typical for Germany, the gas produced from the Field is
high in nitrogen content at 31 per cent and is mixed and blended at
a local station before it enters into the Nowega low caloric gas
regional pipeline at Grossgiesen.
The Field previously produced approximately 66Bcf of gas from
nine wells between 1972 and 1995, when the field was abandoned
following water breakthrough. Four of these wells each produced
more than 10Bcf of gas.
The Field was brought back into production in 2015 by 5P Energy
through the workover and re-entry of an existing well ("Z2") and
the installation of processing facilities at the well site. Since
2015, this vertical well (now renamed H-WD Z2) has produced in
excess of 2.6Bcf at a choked rate of c 3.0 MMscf/d.
5P Energy identified another existing well workover candidate
("Z4") and the drilling operations for the re-opening of this well
(now renamed A-EZ Z4 (2)), which is located less than 1 km away
from H-WD Z2, are complete and, subject to testing, demobilisation,
final approvals and commissioning of the second well, production is
anticipated to start around mid-2018.
Preliminary results of the CPR
The Company is now pleased to announce receipt of the
preliminary results of a Competent Person's Report in relation to
the Alfeld-Elze II Licence and Gas Field (the "CPR") which has been
prepared by Rockflow Resources Limited with an effective date of 31
October 2017.
The following tables sets out the total reserves, which are
attributable to the Phase 1 development of the Alfeld-Elze II
Licence and Gas Field consisting of two wells, the H-WD Z2 well
(which has been in production since January 2015) and the A-EZ Z4
(2) well ("Phase 1"), and the contingent resources of the
Alfeld-Elze II Licence and Gas Field, which are the volumes
estimated to be economically recoverable from a further incremental
three horizontal well programme currently under consideration
("Phase 2").
Reserves
Gross Field (1) Net to Path 50% participating
Interest (2)
------------ ------------------------------------ ------------------------------------
Phase 1P - 2P - 3P - 1P - 2P - 3P -
1 Proved Proved Proved Proved Proved Proved
+ Probable + Probable + Probable + Probable
+ Possible + Possible
------------ -------- ------------ ------------ -------- ------------ ------------
Reserves
- gas
(MMm(3)
) 191 572 1,000 93 284 497
------------ -------- ------------ ------------ -------- ------------ ------------
Contingent Resources
Gross Field (3) Net to Path 50% CoD
participating Interest (4)
(2)
-------------- ---------------------- ---------------------------- -----
Phase 1C - 2C - 3C - 1C - 2C - 3C -
2 Low Best High Low Best High
Case Case Case Case Case Case
-------------- ------ ------ ------ -------- -------- -------- -----
Contingent
resources
- gas
(MMm(3)
) 942 1,802 2,892 471 901 1,446 0.8
-------------- ------ ------ ------ -------- -------- -------- -----
(1) Gross Field gas reserves are the volumes that are estimated
to be economically recoverable from the Field Phase 1 from the
effective date of 31 October 2017.
(2) Assuming an effective date for the Path farm-in of 1 January
2018, at which point, subject to completion of the Proposed
Transaction, Path will become entitled to a 50% participating
interest in the reserves and/or contingent resources estimated by
Rockflow to be in place as at 1 January 2018.
(3) Gross Field gas contingent resources are the volumes that
are estimated to be economically recoverable from the Field Phase 2
incremental horizonal well programme, if carried out.
(4) CoD is the estimated "Chance of Development", that the
volumes will be commercially extracted.
Field Development Plan
Converting the MMm(3) above to Bcf, the CPR has ascribed a 2P
Reserve of 20Bcf for the Phase 1 vertical wells H-WD Z2 and A-EZ Z4
(2). The Phase 2 programme, which may require the drilling of up to
three horizontal wells, has an ascribed 2C Contingent Resource of
64Bcf.
In terms of field economics, the gross capex required to
complete the Investment Phase (2018-2021) is estimated to be up to
EUR25 million. Once complete, the likely increased gas production
will move the project into its long term stable Cashflow Phase
(2022-2035).
Principal terms of the Farm-in Agreement
As initially announced on 15 December 2017, Path is intending to
acquire a 50% participating interest in the Field and enter into a
Joint Operating Agreement with 5P Energy. The consideration
payments are as follows:
Phase 1
EUR5 million, payable in cash, on completion of the Proposed
Transaction ("Completion") as partial reimbursement of the H-WD Z2
costs;
On A-EZ Z4 (2) achieving commercial production, a cash payment
of EUR2 million as partial reimbursement of the Z4 costs accrued
prior to 1 January 2018;
Phase 2
EUR10 million towards 100% of the costs of the drilling,
logging, testing and completion of one or more horizontal wells and
if agreed the acquisition of 3D seismic over the Field; and
Future Performance Payments
Additional future cash payments could amount to EUR7.25 million,
if certain discrete revenue (EUR100 million gross; a EUR3 million
payment) and gas production milestones (10Bcf and 40Bcf; EUR2.25
million and EUR2 million payments respectively) are successfully
met within the first five years of operations following
Completion.
Timetable update
The parties intend to proceed as quickly as possible with the
Proposed Transaction. However, there can be no certainty that the
Proposed Transaction will be successfully completed. Nonetheless,
in order to complete the equity fund raising and seek admission of
the Ordinary Shares to trading on the AIM Market of the London
Stock Exchange ("AIM") in an orderly manner the Company has
requested that the cancellation of the listing of the Ordinary
Shares on the Official List be postponed until 8.00 a.m. on 9 March
2018. Accordingly, it is expected that the last day of dealings in
the Ordinary Shares (which remain suspended) on the Main Market
will be Thursday 8 March 2018.
Further announcements will be made, as appropriate, in due
course.
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
For further information please contact:
Path Investments plc
Christopher Theis
Andy Yeo 020 3934 6632
Shard Capital (Broker and Financial
Adviser)
Simon Leathers
Damon Heath 020 7186 9900
IFC Advisory (Financial PR & IR)
Tim Metcalfe
Miles Nolan
Heather Armstrong 020 3934 6630
The volumetric estimates are made in accordance with SPE
standards.
Reserves are those quantities of hydrocarbons anticipated to be
commercially recoverable by application of development projects to
known accumulations from a given date forward under defined
conditions. Resources are all quantities of petroleum (recoverable
and unrecoverable) naturally occurring on or within the Earth's
crust, discovered and undiscovered, plus those quantities already
produced. Reserves and contingent resources are specific types of
resources. Contingent resources are those quantities of petroleum
estimated, as at a given date, to be potentially recoverable from
known accumulations but where the applicable project(s) are not yet
considered mature enough for commercial development due to one or
more contingencies.
MMm(3) means million cubic metres of natural gas; Bcf means
Billion standard cubic feet of natural gas
This information is provided by RNS
The company news service from the London Stock Exchange
END
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