PXEN Prospex Energy Plc

27 November 2024

Prospex Energy plc

("Prospex Energy" or the "Company")

Viura-1B Well Test Progress

Revenues from Viura-1B are Expected in December

Prospex Energy plc (AIM:PXEN), the investment company focused on European gas and power projects, wishes to update shareholders on the schedule of the flow testing at the Viura-1B development well, which is expected early in December.  The Viura-1B development well which has been drilled by HEYCO Energy Iberia S.L. ("HEI") reached its revised targeted Total Depth ("TD") of 4,500 metres, which is ≈4,100 metres True Vertical Depth ("TVD"), on 21 October 2024 in the 6-inch hole section of the bottom 450 metres of the well.

Prospex owns 7.2365% of the Viura field through its ownership of 7.5% of HEI.  Prospex will receive 14.473% of the production income from the Viura gas field until payback of its initial capital investment from the acquisition in August 2024.

The Viura-1B well is currently being connected to the existing gas processing facilities on site in order to prepare for the imminent flow testing programme, thus immediately generating revenues, with production income expected early in December 2024.  Following flow testing, the well will be placed on long-term production.

As previously reported, the Viura-1B well was deepened by 450 metres in order to appraise the undrilled Utrillas-B formation and assess if it was gas bearing.  Having confirmed the presence of gas-bearing reservoir quality sandstones in the Utrillas-B, the operator completed this interval with a cemented 4½ inch liner.  The flow testing program for the Utrillas B section will be performed during the planned plant shut-down in H2 2025.  

The drilling rig has been moved from the Viura-1B well site location to the produced water disposal well Viura-3 site in order to re-instate its operability to better manage produced water from the existing Viura-1 ST3 production well.

Mark Routh, the CEO of Prospex, commented:

"The Viura-1B development well has been successful and we await confirmation of the anticipated flow rates from the substantial reservoir sections encountered in the main reservoir target of the so-called Utrillas-A formation.  Analysis is ongoing to fully assess the implications of the well results to the recoverable reserves from the Viura field, the flow test numbers will enable confirmation that the project has met and hopefully exceeded its pre-drill objectives.

"I look forward to updating shareholders with results from the flow testing and further analysis as soon we have firm data to share."

Further Information

About Viura:

Prior to drilling the current Viura-1B well, the Viura producing gas field onshore in northern Spain had an estimated gross original gas in place of 211 Bcf (6 Bcm) and estimated reserves of 105 Bcf (3 Bcm).  To date, just 16 Bcf (0.5 Bcm) of gas has been produced from Viura meaning that the remaining reserves were estimated as 90 Bcf (2.5 Bcm) which is 6.5 Bcf (0.18 Bcm) net to Prospex.

In Spain there are only three producing onshore gas fields: El Romeral, Viura and Marismas.  Prospex currently owns a 49.9% share in El Romeral.  HEI currently has a 58.7964% interest in Viura.  The other participants in the ownership of the Viura Field Development are Sociedad de Hidrocarburos de Euskadi, S.A. ("SHESA") (owner of the 37.6901% of the Concession) and Oil and Gas Skills, S.A. (owner of the 3.5135% of the Concession).  On 5 April 2024, HEI entered into an asset purchase agreement with SHESA for the acquisition of the participation of SHESA in the Viura Field Development, which is subject to the fulfilment of certain conditions precedent.  Prospex through its 7.5% shareholding in HEI indirectly owns 7.2365% of the Viura concession, its reserves and the existing surface production facilities of the Viura gas plant, which is connected to the Spanish national grid.

HEI acquired its interest in the Viura gas field and became operator in 2022.  A new 3D seismic survey was acquired in 2013.  There is one well in production in the field Viura-1 ST3, which had been shut in until recently.  This well produces intermittently as water production is managed.  There is a workover now underway on the existing produced water disposal well Viura-3 to reinstate its operability.  HEI has permits in place to drill one further development well, Viura-3B, scheduled to start in the second quarter of 2025.  Permits have been submitted to drill a third development well on the concession Viura-3A batch drilled with Viura-3B well in 2025.

The Viura-1B well commenced drilling operations on 22 June 2024.  The new investors (including Prospex) into HEI are funding 31.58% of the development costs to earn 15.79% ownership of HEI.  Prospex is funding 15% of the development costs of the HEI development programme comprising the current well in 2024 and the proposed 2025 two well drilling programme to earn 7.5% ownership of HEI and indirectly 7.2365% of the Viura asset.

Other new investors are funding 16.58% of the development costs to earn an 8.29% ownership in HEI.

The two new wells to be drilled from the first half of 2025 and completed in the second half of 2025 are to be funded from revenues from existing and new production from Viura or from new funds if required.  Viura-1B is expected to be generating revenues from production in early December 2024 following the completion of the testing programme.  The 2025 development programme is to be funded by future cash calls or from Phase 1 production or both.

There is a preferred pay-back mechanism for Prospex and all participants (including HEGI and new investors) of this new investment in HEI, the ("HEI Investors").  The HEI Investors will enjoy a 10% interest on their capital investments paid out from the existing and future production from Viura.  Until the HEI Investors have recovered their full capital commitments, plus the 10% preferred interest return, HEGI will not receive production income on their other 50% ownership of HEI over and above operating expenses and an allowance for Spanish taxes and royalties.  This means that Prospex will earn 14.473% of the revenues from the gas production from the Viura field until it has achieved payback of the £4.2 million capital investment it made in August 2024 to acquire the asset.  The gross cost (including the current Viura-1B well which has already been funded) of the three phase, three-year Viura development programme is estimated at a total of £55.4 million ($70.4 million).  HEGI is funding over 50% of that programme and the new HEI Investors are funding 31.58% through their interest in HEI which earns them an indirect 15.2368% ownership of the Viura asset (net 7.2365% to Prospex).

Qualified Person Signoff

In accordance with the AIM note for Mining and Oil and Gas Companies, the Company discloses that Mark Routh, the CEO and a director of Prospex Energy plc has reviewed the technical information contained herein.  Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985.  He has more than 40 years operating experience in the upstream oil and gas industry.  Mark Routh consents to the inclusion of the information in the form and context in which it appears.

For further information, please contact:

Further information on the Company can be found on its website at www.prospex.energy.

Notes

Prospex Energy PLC is an AIM quoted investment company focused on high impact onshore and shallow offshore European opportunities with short timelines to production.  The Company's strategy is to acquire undervalued projects with multiple, tangible value trigger points that can be realised within 12 months of acquisition and then applying low-cost re-evaluation techniques to identify and de-risk prospects.  The Company will rapidly scale up gas production in the short term to generate internal revenues that can then be deployed to develop the asset base and increase production further. 

The Company currently has three non-operated, revenue generating, onshore producing gas investments in Europe with low operational risk:

•     Selva Malvezzi, northern Italy (37% interest)

•     El Romeral gas to power plant, southern Spain (49.9% interest)

•     Viura Gas Field, northern Spain (7.24% interest)

Prospex also owns a 15% interest in the Tesorillo Exploration Permit in Southern Spain, with the option to increase to 49.9%.

Glossary:

scm                    Standard cubic metres

scm/d                 Standard cubic metres per day

MMscm              Million standard cubic metres

MMscm/d           Million standard cubic metres per day

Bcm                    Billion standard cubic metres

Bcf                      Billion standard cubic feet

MMscfd               million standard cubic feet per day

MWh                   Mega Watt hour

TTF                     The 'Title Transfer Facility' - a virtual trading point for natural gas in the Netherlands.