TIDMPXOG
RNS Number : 3380Z
Prospex Oil and Gas PLC
26 May 2016
Prospex Oil and Gas plc
("Prospex" or the "Company")
Investment Update: Receipt of Competent Persons Report
The Board of Prospex (LSE AIM: PXOG) is pleased to announce that
following the engagement of AGR TRACS International Limited ("AGR
TRACS") to review the Kolo Licence, held by Hutton Poland Limited,
from both a geological and economic perspective the results of that
Competent Persons Report ("CPR") has now been received. The Kolo
Licence is part of a portfolio of investments held by Hutton Poland
Limited, in which Prospex holds a 49% investment stake.
A copy of the CPR is located on the Company's website:
www.prospexoilandgas.com and a summary of the findings and the
Executive Summary from the CPR are set out below.
Key Points:
-- Gross Best Estimate Technical Unrisked Prospective Resources
for the Boleslaw prospect (within the Kolo Licence) are estimated
at 87.1 Bscf. All estimates are expressed as reservoir gas quality
at surface conditions, and include N2 and other inerts.
-- The prospect comprises two objectives within the Cretaceous
sequence; a Santonian objective (geological possibility of success,
POSg, estimated at 40%) supported by distinct seismic amplitude
anomalies, and a Deep Cretaceous target (POSg 20%) with possible
amplitude indications.
-- Economic assessments clearly indicated that in the case of a
gas discovery with N2 content less than 50mol% a Gas-to-Power
(combined heat and power, "CHP") development concept would be
economically robust above a minimum threshold of around 25Bscf GIIP
of gas.
-- The economic results assuming the CHP notional development
were used to interpolate indicative unrisked NPVs (based on a 10%
discount rate) for the Mean resource cases under the four N2
thresholds less than 50mol%. The indicative NPVs ranged from $44m
to $95m (net to Prospex). These Mean NPVs were combined in decision
tree analysis along with the POSg and the N2 risks in order to
derive indicative Expected Monetary Values ("EMVs"), which include
the potential dry hole costs and failed exploration wells with well
test costs where required.
-- The notional CHP development scenarios were based on a single
well assuming production rates of 20MMscf to 40MMscf per day (3333
to 6666 boe/d)
-- The economic assessment based on the AGR TRACS N2 risk profile indicated a risked EMV of $7.1mln/GBP5.0mln (net to Prospex), while corresponding evaluations assuming Prospex's N2 risk profile suggested a risked EMV of $12.2.mln/GBP8.4mln (net to Prospex), where both estimates were derived assuming current electricity prices.
Bill Smith, Chairman of Prospex commented "We are pleased with
the report prepared by AGR TRACS. We believe it demonstrates the
significant value in the Hutton Poland investment, GBP5mln to
GBP8.4mln, compared to the investment cost of GBP620,000 and the
potential for the project moving forward. If successful, a well on
the Boleslaw prospect could unlock significant value for the
Company.
Executive Summary
AGR TRACS International Ltd. ("AGR TRACS") was engaged by
Prospex Oil & Gas Ltd ("Prospex") to review the Boleslaw
prospect in the Kolo Licence, onshore central Poland. The prospect
comprises two objectives (Santonian and Deep Cretaceous) within the
Upper Cretaceous, and is located in the Kolo licence in the Lodz
Trough in the Central Polish Lowlands, approximately 150km west of
Warsaw.
In early April 2016 Prospex completed the acquisition of a 49%
stake in Hutton Poland Ltd from Hutton Energy Ltd. Hutton and
Prospex will fund their respective share of exploration and
development costs going forward. The Kolo exploration licence was
formally awarded to Hutton Poland Ltd on 26 April 2016 for a four
year exploration period comprising two phases each of 2 years'
duration with a number of work commitments including seismic
acquisition, reprocessing and drilling.
AGR TRACS was provided with a comprehensive dataset, including
66 2D seismic lines (eight of which help define the Boleslaw
prospect), a large number of wells, supporting geological and
geophysical studies, and the results from the recent seismic
inversion project carried out by DownUnder Geosolution ("DUG").
Following this review AGR TRACS can report that the Gross (100%)
Best Estimate Technical Unrisked Prospective Resources for the
Boleslaw prospect in the Kolo Licence, Poland, are estimated at
87.1 Bscf. The prospect comprises two objectives within the
Cretaceous sequence, a Santonian and a Deep Cretaceous target
mapped on a grid of 2D seismic data and supported by distinct
amplitude anomalies. The Gross (100%) Best Estimate Technical
Prospective Resources for the individual targets are estimated at
31.5 Bscf in the Santonian and 55.6 Bscf in the Deep Cretaceous,
see Table ES.1. The Net Attributable Best Estimate Unrisked
Prospective Resources to Prospex are estimated at 42.7 Bscf for the
overall prospect, comprising 15.5 Bscf in the Santonian and 27.2
Bscf in the Deep Cretaceous, see Table ES.1. All these estimates
are expressed as reservoir gas quality at surface conditions, and
include N2 and other inerts.
Oil & Liquids: Gross Technical Net Attributable Risk Operator
MMbbls Prospective Resources Technical Prospective Factor
Gas: Bscf Resources
----------------- ---------------------------------- ---------------------------------- -------- ---------
PROSPECT Low Best High Low Best High POS
Estimate Estimate Estimate Estimate Estimate Estimate (%)
----------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- ---------
GAS (Reservoir gas quality incl. N2) - Bscf
--------------------------------------------------------------------------------------------------------------
Santonian 18.1 31.5 49.4 8.8 15.5 24.2 40% Hutton
----------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- ---------
Deep Cretaceous 16.4 55.6 105.8 8.0 27.2 51.9 20% Hutton
----------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- ---------
TOTAL# 34.5 87.1 155.2 16.9 42.7 76.1
----------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- ---------
Table ES.1: AGR TRACS estimates of Gross and Net Attributable
Prospective Resources to Prospex in the Boleslaw prospect, Kolo
Licence, Poland
"Risk Factor" for Prospective Resources means the chance, or
probability, of discovering hydrocarbons in sufficient quantity for
them to be tested to the surface. This, then, is the chance or
probability of the Prospective Resources maturing into a Contingent
Resource. Where a prospect could contain either oil or gas the
hydrocarbon type with the higher probability of being discovered
has been listed in the table. The volumes tabulated are expressed
as reservoir gas quality including N2 and other inert components,
and are the estimated technically recoverable volumes without any
economic cut-off applied.
"Operator" is the name of the company that operates the
asset.
"Gross" are 100% of the resources attributable to the licence
whilst "Net Attributable" are those attributable to the AIM
company.
"Total...#" - implies totals have been derived by arithmetic
summation without any probabilistic addition.
The Best Estimate Risked Technical Prospective Resources Net
Attributable to Prospex are estimated at 11.6 Bscf, comprising 6.2
Bscf in the Santonian and 5.4 Bscf in the Deep Cretaceous, see
Table ES.2 below. As before, these estimates are expressed as
reservoir gas quality at surface conditions, and include N2 and
other inerts.
Oil & Liquids: Unrisked Technical Risk Risked Technical
MMbbls Prospective Resources Factor Prospective Resources
Gas: Bscf Net Attributable Net Attributable
to Prospex to Prospex
----------------- ---------------------------------- -------- ----------------------------------
PROSPECT Low Best High POS Low Best High
Estimate Estimate Estimate (%) Estimate Estimate Estimate
----------------- ---------- ---------- ---------- -------- ---------- ---------- ----------
GAS (Reservoir gas quality incl. N2) - Bscf
---------------------------------------------------------------------------------------------------
Santonian 8.8 15.5 24.2 40% 3.5 6.2 9.7
----------------- ---------- ---------- ---------- -------- ---------- ---------- ----------
Deep Cretaceous 8.0 27.2 51.9 20% 1.6 5.4 10.4
----------------- ---------- ---------- ---------- -------- ---------- ---------- ----------
TOTAL# 16.9 42.7 76.1 5.1 11.6 20.1
----------------- ---------- ---------- ---------- -------- ---------- ---------- ----------
Table ES.2: AGR TRACS estimates of Net Unrisked and Risked
Prospective Resources attributable to Prospex in the Boleslaw
prospect, Kolo Licence, Poland
"Total...#" - implies totals have been derived by arithmetic
summation without any probabilistic addition.
There is significant uncertainty around the possible N2 content,
as the database of 48 gas analyses from nearby wells suggests
possible N2 contents from less than 10mol% to more than 90mol%. AGR
TRACS and Prospex have discussed this issue in considerable detail,
and as a result two risk assessments for the possible N2 content in
the Boleslaw prospect were derived and applied in the economic
evaluations, see Table ES.3 below. In general, any N2 content
greater than 50mol% is considered, at present, to preclude a
commercial development of any gas discovery.
N2 mol% AGR TRACS Prospex
---------------- -------------------- --------
6.25% (3 samples
N2< 15% out of 48) 14%
---------------- -------------------- --------
12.50% (6 samples
15% < N2 < 25% out of 48) 11%
---------------- -------------------- --------
18.75% (9 samples
25% < N2 < 40% out of 48) 47%
---------------- -------------------- --------
12.50% (6 samples
40% < N2 < 50% out of 48) 5%
---------------- -------------------- --------
50.00% (24 samples
N2 > 50% out of 48) 23%
---------------- -------------------- --------
Table ES.3: AGR TRACS and Prospex risk assessments for N2
content in the Boleslaw prospect
Economic evaluations were carried out for a range of notional
GIIP cases (10, 30, 50, 100 and 200 Bscf) based on notional
production profiles and conceptual development costs for two
development scenarios; the first based on conventional gas
processing with N2 removal (if required) and a Low-Cal gas export
pipeline of some 90km length tying into the Low Cal grid in western
Poland, and the second assuming a dedicated Combined Heat-Power
("CHP") facility and power export via the national grid a few km
away. The economic assessments clearly indicated that the CHP
concept was economically robust, while the Low-Cal export option
appeared sub-economic to non-commercial with markedly poorer to
negative NPVs compared to the notional CHP development scheme.
The CHP results were therefore used to interpolate indicative
NPVs for the Mean resource cases under the four N2 thresholds less
than 50mol% listed in Table ES.3. These Mean NPVs were combined in
an extensive decision tree analysis (with more than 120 outcome
nodes) along with the POSg and the N2 risks in order to derive
indicative Expected Monetary Values ("EMVs"), which include the
potential dry hole costs and failed exploration wells with well
test costs where required. The resulting EMVs are listed in Table
ES.4, which demonstrate that the prospect is economically robust
under both the N2 risk profiles provided in Table ES.3.
CHP developments EMV(10%) US$mln PV 1.1.2016
with POSg
and N2 risk
scenarios
------------------ ------------------------------------------------------
100% of project Prospex net 49%
------------------ -------------------------- --------------------------
PLN 120/MWh PLN 144/MWh PLN 120/MWh PLN 144/MWh
------------------ ------------ ------------ ------------ ------------
AGR TRACS
N2 risks 9.7 14.5 4.8 7.1
------------------ ------------ ------------ ------------ ------------
Prospex N2
risks 17.1 24.9 8.4 12.2
------------------ ------------ ------------ ------------ ------------
Table ES.4: Summary of EMV estimates for CHP development cases
and N2 risk scenarios
Bjørn Smidt-Olsen, (SLOAN Fellow, MSc Petroleum Exploration
Studies), a managing consultant of APR Tracs, has reviewed and
approved the inclusion of the material in this announcement in the
form and context in which it appears.
Prospex Oil and Gas plc
Edward Dawson, Managing Director 0207 887 1461
WH Ireland Limited (Nominated
Adviser and Broker)
Katy Mitchell/Nick Prowting 0113 394 6600
Jay Ashfield 0207 220 1658
Peterhouse Corporate Finance Limited
(Joint Broker)
Lucy Williams / Charles Goodfellow
/ Eran Zucker 0207 469 0932
Beaufort Securities Limited (Joint
Broker)
Jon Belliss 0207 382 8300
Glossary of Technical Terms
Bscf Billion standard cubic
feet of natural gas
------ -----------------------
GIIP Gas Initially In Place
------ -----------------------
MMscf Million standard cubic
feet of natural gas
------ -----------------------
mol% % by molecular weight
------ -----------------------
POSg Probability of Success
to find gas
------ -----------------------
This information is provided by RNS
The company news service from the London Stock Exchange
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