TIDMMSMN
RNS Number : 8166C
Mosman Oil and Gas Limited
23 June 2021
23 June 2021
Mosman Oil and Gas Limited
("Mosman" or the "Company")
Acquisition of Production Assets in East Texas
Mosman Oil and Gas Limited (AIM: MSMN) the oil exploration,
development and production company, has today acquired all of the
issued shares in Nadsoilco LLC, ("Nadsoilco") for a cash
consideration of US$1.1 million, which will be paid from existing
cash reserves (the "Acquisition").
Key Highlights
-- 20% increase in working interest ("WI") in the Stanley Project from 15-19% to 35-39%
- Net production increase from circa 27 to 60 bopd (based on
prior quarter)
-- 20% WI in the oil producing Livingston Leases
-- 23.3% WI in oil producing Winters Lease with development well to be drilled
-- Mosman becomes Operator of these leases, providing more
control over day-to-day operations and drilling new wells
Acquisition Details
The Acquisition immediately increases Mosman's net production
from the Stanley, Livingston, and Winters leases located in East
Texas. This Acquisition includes extensive oil and gas
infrastructure including the producing wells, separators, tanks,
pump jacks and a water disposal well, as well as a gas pipeline and
the associated infrastructure.
Nadsoilco has a 20% working interest in the lease and the four
wells in the producing Stanley project as well as a 20% working
interest in the Livingston Leases and 23.3% interest in the Winters
Lease.
The Stanley Lease covers c160 acres and currently includes four
projects where the working interest has increased by 20% to a range
of 35 - 39%.
The Livingston Lease comprises two leases covering approximately
214 acres. The leases contain surface processing facilities which
are adjacent and/or overlay the Stanley project.
The Winters Lease is held by production with one well currently
producing and a development well planned to be drilled in July
2021. The lease is located near to Stanley with similar
geology.
The initial consideration of US$0.9m will be paid from existing
cash reserves, with an additional deferred payment of US$0.2m That
structure has eliminated the need to externally fund the
Acquisition. The deferred cash payment consists of US$100,000 one
year from Acquisition, and a further US$100,000 payable in two
years from Acquisition.
Production
The Stanley Project produced 24,982 barrels of oil (gross) in
the six months ended 31 December 2020, which was impacted by the
decision to implement essential cost controls introduced due to
lower oil prices as a result of the COVID19 pandemic. Gross
production in the quarter ended March 2021 was 14,557 barrels of
oil (gross). Future production rates will depend on the flow rates
of these wells after recent workovers.
The Livingston Lease is Held By Production ("HBP") and produced
circa 1,660 bbls of oil in the last 12 months. Mosman believes
there is potential for significantly higher production with
workovers and/or new development wells.
The Winters lease is HBP with nominal production from Winters-1
of circa 969 bbls of oil in the last 12 months. Once Mosman assumes
Operatorship, it plans to drill Winters-2 as a development well
targeting the Wilcox formation in the near future. A nearby Wilcox
formation well is reported to have been producing at 190 bopd.
Planned Activity
The Operator has proposed two wells to be drilled as soon as a
rig is available. The two wells are Winters-2 (in which Mosman will
have at least 18.9% WI) and Stanley-5 (Mosman 35-39% WI).
Mosman has contracted a company owned by Howard McLaughlin, who
has acted in this capacity in respect of other of the Company's US
assets, to provide services for the new assets and who will
continually work on optimising production with drilling, workovers
and re-completions.
In parallel to this Acquisition, Mosman will continue to work on
its other East Texas projects, namely Falcon, Galaxie and Cinnabar,
in addition to the important developments at its Amadeus Basin
exploration assets in Australia.
John W Barr, Chairman, said: "The Board is delighted to complete
the Acquisition of Nadsoilco that it has been working on for some
months. This will immediately boost Mosman's production base and
cash flow, and provide multiple near-term drilling and development
activity.
"We believe that increasing Mosman's interest in these projects
is a fast-track to increasing production. The Operatorship is
particularly important as Mosman can now drive the project forward
with renewed vigor.
"From an economic perspective, development of the Polk County
area is the priority with its low well costs, low operating costs
and low risk, coupled with existing infrastructure.
"It is important to note the Acquisition will run alongside the
other US producing assets, including the Falcon-1 project, and the
ongoing work in Central Australia on EP-145 on helium / hydrogen
exploration."
Ownership
Mosman working interests in leases and individual wells pre and
post the Acquisition are (*):
Name Current Working New Working Number of wells Lease size
Interest % Interest % (acres)
Livingston Leases 0 20 8 c214
---------------- ------------ --------------- ----------
Winters Lease 0 23.3 1 c48
---------------- ------------ --------------- ----------
Stanley project c160
includes:
---------------- ------------ --------------- ----------
Stanley 1 16.5 36.5 1
---------------- ------------ --------------- ----------
Stanley 2 19.06 39.06 1
---------------- ------------ --------------- ----------
Stanley 3 15.51 35.51 1
---------------- ------------ --------------- ----------
Stanley 4 16.5 36.5 1
---------------- ------------ --------------- ----------
(*) All net working interest percentages to Mosman are before
25% wellhead royalties
Mosman will take over the operatorship of the operations
associated with the above leases and wells.
There is not currently any independent report to quantify
resources or reserves at any of the above leases or the Stanley
area projects.
Livingston Leases
As part of the Acquisition, Mosman has also acquired a 20%
interest in the Livingston Leases which overlay the Stanley project
wells, which consist of two leases covering some 214 acres,
containing oil and gas production infrastructure and surface
processing facilities.
The Livingston Leases largely overlay the deeper Stanley project
lease where Mosman has participated in drilling four successful
wells. The existing infrastructure includes producing well, a water
injection well, and other infrastructure such as tanks and
pipelines.
Whilst the Livingstone wells are currently producing only a
modest amount of oil, Mosman believes there is re-development
potential in the various zones covered by the lease.
Similar to other East Texas projects there is a royalty of 25%
and there are normal state severance taxes.
Winters Lease
As part of the Acquisition, Mosman has also acquired a 23.3%
interest in the Winters Lease covering some c48 acres abutting the
Greater Stanley project. The existing infrastructure includes one
producing well.
Although current oil production at the Winters Lease is modest,
Mosman believes there is workover and redevelopment potential. The
Operator is planning a development well (in which Mosman will have
at least 18.9% WI).
Timing of Settlement
The Acquisition is now only subject to normal settlement matters
and registration which are expected to be satisfied within the next
30 days.
The effective date of the Acquisition is 1 July 2021.
Payment will be made from cash reserves. At 14 June 2021, Mosman
had a cash reserve of approximately A$3.6 million.
Nadsoilco previous financial information
Nadsoilco is a LLC and is owned by Mr. Bruce Reichert and Mr.
Paul M. VanCleve, of Texas, and Mosman will acquire all of the
shares in that company.
Based on the last available completed financial statements (May
2021), Nadsoil had no long term or secured debt, and had net assets
of c US$370,000.
Included in those numbers are c US$170,000 in debtors which
relate to operations and also
c US$96,000 in current liabilities all of which relate to
operational activities.
The fixed assets include operation equipment and the accumulated
capital cost of development of the oil and gas leases. These assets
have been revalued to reflect their current value.
Nadsoilco estimated profit before tax for the year ended 31
December 2020 is approximately US$60,000.
Nadsoilco historical production
Projects Gross Project Production Gross Project Production
12 Months to 31 December 3 Months to 31 March
2020 boe 2021 boe
Stanley 53,522 14,557
-------------------------- -------------------------
Livingston 1,660 654
-------------------------- -------------------------
Winters 962 206
-------------------------- -------------------------
1. BOE/boe - barrels of oil equivalent
2. Gross Project Production - means the production of BOE at a
total project level (100% basis) before royalties for the
project.
Similar to other East Texas projects, a wellhead royalty of 25%
and normal state severance taxes apply.
Qualified Person's Statement
The information contained in this announcement has been reviewed
and approved by Andy Carroll, Technical Director for Mosman, who
has over 35 years of relevant experience in the oil industry. Mr
Carroll is a member of the Society of Petroleum Engineers.
Market Abuse Regulation (MAR) Disclosure
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ('MAR') which has
been incorporated into UK law by the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement via Regulatory
Information Service ('RIS'), this inside is now considered to be in
the public domain.
Enquiries:
Mosman Oil & Gas Limited John NOMAD and Broker
W Barr, Executive Chairman SP Angel Corporate Finance LLP
Andy Carroll, Technical Director Stuart Gledhill / Richard Hail /
jwbarr@mosmanoilandgas.com Adam Cowl
acarroll@mosmanoilandgas.com +44 (0) 20 3470 0470
Alma PR Joint Broker
Justine James / Joe Pederzolli Monecor (London) Ltd trading as ETX
+44 (0) 20 3405 0205 Capital Thomas Smith
+44 (0) 7525 324431 020 7392 1432
mosman@almapr.co.uk
Updates on the Company's activities are regularly posted on its
website:
www.mosmanoilandgas.com
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