TIDMROSE
RNS Number : 2125S
Rose Petroleum PLC
22 June 2018
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No. 596/2014 ("MAR"). With the publication of this announcement,
this information is now considered to be in the public domain.
22 June 2018
Rose Petroleum plc
("Rose", the "Company" or the "Group")
Competent Person's Report
Maiden Contingent Resource and NPV Estimate
Rose Petroleum plc (AIM: ROSE), the North America-focused oil
and gas company, is pleased to announce the results of the
Competent Person's Report ("CPR") by Gaffney Cline & Associates
("GCA") on the Rose acreage within the Paradox Basin, Utah covered
by the recently completed 3D seismic acquisition.
Rose engaged GCA to provide a CPR for the acreage held and
covered by the 3D seismic acquisition completed in late 2017
(covering approx. 17,250 acres of the total circa. 80,000 acres
held). The CPR focused solely on the single reservoir the Cane
Creek reservoir (the "CCR" or "Clastic 21") of the multiple
prospective reservoirs within the Paradox Formation.
Rose is pleased to report the results of the GCA report as
summarised below:
Summary of Contingent Resources as at 30(th) April 2018:
Category Gross Gross Net to Net to
Rose*** Rose***
Oil Gas Oil Gas (Bscf)
(MMBbl)* (Bscf)** (MMBbl)
----------------------- ----------------------- ---------------------- ----------------------
1C 5.08 6.09 3.01 3.61
----------------------- ----------------------- ---------------------- ----------------------
2C 15.61 31.23 9.25 18.50
----------------------- ----------------------- ---------------------- ----------------------
3C 31.49 110.20 18.66 65.29
----------------------- ----------------------- ---------------------- ----------------------
* million barrels of oil ** Billion cubic feet ***Net of 25%
working interest plus royalties and subject to earn-in
completion
The unrisked Net Present Value at 10% Discounted Rate of
Potential Future Cash Flow from Contingent Resources, Net to Rose,
as at 30(th) April 2018, are reported as follows:
Category Pre Tax NPV Post Tax NPV
(US$ MM) (US$ MM)
1C 6.7 2.5
------------ -------------
2C 122.4 86.9
------------ -------------
3C 335.3 242.8
------------ -------------
This Contingent Resource, subcategorised as Development Pending,
is a significant step change in the Clastic 21 project definition
that started with the acquisition of the 3D seismic. The new data
has enabled detailed reservoir mapping, reservoir characterisation,
field analogue assessment, well engineering and draft field
development planning to be completed, leading to the first project
valuation for this acreage. Further to this, the assessment has
also identified the initial appraisal well locations that are
planned to test the range in field potential, as described within
the GCA report.
The significance of the report is that is shows an upgrade from
Prospective to Contingent Resources for Clastic 21 within the
specified area. This is due to the ability to tie the 3D seismic
data into the producing well 28-11 and map the maximum extent of
the producing field within this area. The initial appraisal wells
are designed to test the viability of the fracture network and to
potentially prove the extent and commerciality of the field.
Rose currently has a total net acreage position of circa 80,000
acres. Within this acreage the management believe there is
additional prospectivity covering up to 37,000 acres in which
Clastic 21 is likely to be present. Additional shallower clastic
reservoir prospectivity also exists within the greater 80,000 acres
and presents further upside as reiterated by the un-risked
Prospective Resources reported by Ryder Scott Company in May 2014.
Rose's assessment of this exploration potential will be updated in
the near future with an additional CPR.
Matthew Idiens, CEO, commented: "We are hugely encouraged by the
reclassification of Contingent Resources within the 3D seismic
acquisition area, reporting, net to Rose, a 2C Contingent Resource
of 9.25 million barrels of oil and 18.50 Bscf of Gas and an
unrisked pre-tax NPV10 of US$122 million. These metrics highlight
the substantial scale and prospectivity of the Paradox project. The
NPV estimate clearly demonstrates the significant upside potential
compared to the Company's current valuation and this covers only a
small portion of the total acreage position."
"This assessment very much justifies our appraisal plans, which
will be the first combination of horizontal drilling steered by the
3D seismic data on Rose acreage. A similar approach has proven
successful in the development of the Cane Creek Field analogue
directly south of our acreage. We are working hard to evaluate the
remaining Clastic 21 potential outside the 3D area and shallower
prospective zones both within the 3D area and beyond, which
represent further upside opportunities within Rose's existing
acreage footprint."
"The farm-in process continues and is now supported by the CPR
independently validating the geological and economic strength of
the Project."
The previous CPR by Ryder Scott Company, reported in May 2014,
covered all the Company's acreage at that time and included up to
15 separate reservoirs (clastics) and reported Unrisked Prospective
(Recoverable) Hydrocarbon Resources on a Best Case (P50 equivalent)
of:
-- 966.37 MMBO (966 million barrels of oil) and
-- 1,888.46 BCFG (1.88 trillion cubic feet of gas).
The Executive Summary from the CPR is set out further below. The
CPR was prepared using definitions contained within the Petroleum
Resources Management System (PRMS), which was approved by the
Society of Petroleum Engineers, the World Petroleum Council, the
American Association of Petroleum Geologists and the Society of
Petroleum Evaluation Engineers in March 2007.
Contacts:
Tel: +44 (0)20
Rose Petroleum plc 7225 4595
Matthew Idiens (CEO) Tel: +44 (0)20
Chris Eadie (CFO) 7225 4599
Allenby Capital Limited - AIM Nominated Adviser Tel: +44 (0)20
Jeremy Porter / James Reeve / Liz Kirchner 3328 5656
Cantor Fitzgerald Europe -Financial Adviser Tel: +44 (0)131
and Joint Broker 257 4634 Tel: +44
Nicholas Tulloch (0)20 7894 7686
David Porter
Turner Pope Investments - Joint Broker
Andy Thacker Tel: +44 (0)20
3621 4120
Media enquiries:
Allerton Communications Tel: +44 (0) 20 3633 1730
Peter Curtain peter.curtain@allertoncomms.co.uk
Dr Gregor Maxwell, BSc Hons. Geology and Petroleum Geology, PhD,
Technical Adviser to the board of Rose Petroleum plc, who meets the
criteria of a qualified person under the AIM Note for Mining and
Oil & Gas Companies - June 2009, has reviewed and approved the
technical information contained within this announcement.
Executive Summary
Rose Petroleum is in the process of earning a 75% Working
Interest (WI) in circa 80,000 acres in the northwestern part of the
Paradox Basin, Utah as a result of the Earn-In agreement signed on
March 13th, 2014, with Rockies Standard Oil Company (RSOC). The
earn-in will be completed by the drilling of a single appraisal
well which is planned for later this year.
This CPR covers solely, a single reservoir, within the Paradox
Formation. The single reservoir evaluated for the purpose of this
report is the Cane Creek Reservoir Cycle (CCRC or Clastic 21) and
only within the extent of the leased 3D area (approx. 17,250 acres
of circa 80,000 acres held). Other reservoirs prospective potential
within the Paradox Formation are not covered in this report.
Within Rose Petroleum's expected acreage, reservoir potential
exists in the Cane Creek Reservoir Cycle of the Paradox Formation.
This is an oil source rock containing interbedded tight reservoir
cycles that forms a hybrid unconventional play; it has been
productive at the nearby Cane Creek Field, and at the 28--11 well
just outside the Rose Petroleum acreage. Two other wells, one
inside the acreage, logged oil pay but failed to flow when tested.
Productivity of the reservoir is believed to be linked to the
presence of natural fractures, which in turn are believed to occur
in areas on high curvature, which can be mapped from a very well
defined 3D seismic framework.
Rose Petroleum is now planning an up to three-well appraisal
plan to assess the productivity of the naturally fractured
reservoir and to test the predictive model of fracture locations.
If the appraisal results are positive, a field development
comprising up to 60 horizontal wells would be implemented.
Rose Petroleum has performed extensive analysis and modelling
work, which GCA has reviewed and generally found to be of good
quality. Based on its review, GCA has made its own independent
estimates of the Contingent Resources attributable to the proposed
development plan as at 30(th) April, 2018, as shown in Table 1.
Table 2 summarises the unrisked pre- and post-tax NPVs of future
cash flow from Contingent Resources at a discount rate of 10%. This
evaluation is based on GCA's 2Q 2018 WTI and Henry Hub price
scenario (see Section 5.2).
Table 1: Summary of Contingent Resources,
as at 30(th) April, 2018
Category Gross Net to Rose Petroleum
Oil Gas Oil Gas
(MMBbl) (Bscf) (MMBbl) (Bscf)
--------- -------- ------------ ----------
1C 5.08 6.09 3.01 3.61
--------- -------- ------------ ----------
2C 15.61 31.23 9.25 18.50
--------- -------- ------------ ----------
3C 31.49 110.2 18.66 65.29
--------- -------- ------------ ----------
Notes:
1. Gross Contingent Resources are 100% of the volumes estimated
to be recoverable from the asset in the event that it is
developed.
2. Contingent Resources Net to Rose Petroleum reflect Rose
Petroleum's expected 75% working interest and deduction of
Royalties, and are conditional on completion of the earn-in.
3. The volumes reported here are "unrisked" in the sense that no
adjustment has been made for the risk that the asset may not be
developed in the form envisaged or may not be developed at all
(i.e. no "Chance of Development" factor has been applied).
4. Contingent Resources should not be aggregated with Reserves
because of the different levels of risk involved.
Table 2: Unrisked Net Present Value at 10% Discount Rate
of Potential Future Cash Flow from Contingent Resources,
Net to Rose Petroleum, as at 30(th) April, 2018
Category Pre-Tax NPV Post-Tax NPV
(US$ MM) (US$ MM)
1C 6.7 2.5
------------ -------------
2C 122.4 86.9
------------ -------------
3C 335.3 242.8
------------ -------------
Notes:
1. The Net Present Values are calculated from discounted cash
flows incorporating the fiscal terms governing the asset.
2. The reference NPVs reported here do not represent an opinion
as to the market value of a property nor any interest therein.
3. The NPVs reported here are "unrisked" in the sense that no
adjustment has been made for the risk that the asset may not be
developed in the form envisaged or may not be developed at all
(i.e. no "Chance of Development" factor has been applied).
4. Pre and Post-tax refer to pre and post State and Federal
income taxes only; Severance Taxes are deducted in all cases.
5. NPVs Net to Rose Petroleum are conditional on completion of the earn-in.
6. Rose Petroleum holds US$10 MM in Net Operating Losses (NOL)
which can be offset against Federal Income Tax, which has not been
accounted for in this evaluation.
Oil and Gas Prices
GCA's 2Q 2018 WTI and Henry Hub price scenario (Table 4) was
used for the economic analysis. Based on information provided by
Rose Petroleum the realized prices are expected to include a
US$10/Bbl discount for crude and a US$0.50/Mscf discount for
natural gas.
Table 3: GCA 2Q 2018 WTI and Henry Hub Price Scenario
Year WTI Price Henry Hub Price
(US$/Bbl) (US$/Mscf)
2019 59.21 2.79
----------- ----------------
2020 62.50 3.12
----------- ----------------
2021 63.75 3.39
----------- ----------------
2022 65.03 3.62
----------- ----------------
2023 66.33 3.81
----------- ----------------
2024 67.65 3.95
----------- ----------------
2025 69.01 4.08
----------- ----------------
2026 70.39 4.21
----------- ----------------
2027 71.79 4.30
----------- ----------------
2028 +2% p.a. +2% p.a.
----------- ----------------
Glossary of Terms and Definitions
1C Low Estimate of Contingent Resources
2C Best Estimate of Contingent Resources
3C High Estimate of Contingent Resources
CONTINGENT RESOURCES
Those quantities of petroleum estimated, as of a given date, to
be potentially recoverable from known accumulations by application
of development projects, but which are not currently considered to
be commercially recoverable due to one or more contingencies.
Contingent Resources may include, for example, projects for
which there are currently no viable markets, or where commercial
recovery is dependent on technology under development, or where
evaluation of the accumulation is insufficient to clearly assess
commerciality. Contingent Resources are further categorized in
accordance with the level of certainty associated with the
estimates and may be sub-classified based on project maturity
and/or characterized by their economic status.
Development Pending A discovered accumulation where project
activities are ongoing to justify commercial development in the
foreseeable future.
The project is seen to have reasonable potential for eventual
commercial development, to the extent that further data acquisition
(e.g. drilling, seismic data) and/or evaluations are currently
ongoing with a view to confirming that the project is commercially
viable and providing the basis for selection of an appropriate
development plan. The critical contingencies have been identified
and are reasonably expected to be resolved within a reasonable time
frame. Note that disappointing appraisal/evaluation results could
lead to a re-classification of the project to "On Hold" or "Not
Viable" status. The project "decision gate" is the decision to
undertake further data acquisition and/or studies designed to move
the project to a level of technical and commercial maturity at
which a decision can be made to proceed with development and
production.
Development Unclarified or on Hold
A discovered accumulation where project activities are on hold
and/or where justification as a commercial development may be
subject to significant delay.
The project is seen to have potential for eventual commercial
development, but further appraisal/evaluation activities are on
hold pending the removal of significant contingencies external to
the project, or substantial further appraisal/evaluation activities
are required to clarify the potential for eventual commercial
development. Development may be subject to a significant time
delay. Note that a change in circumstances, such that there is no
longer a reasonable expectation that a critical contingency can be
removed in the foreseeable future, for example, could lead to a
reclassification of the project to "Not Viable" status. The project
"decision gate" is the decision to either proceed with additional
evaluation designed to clarify the potential for eventual
commercial development or to temporarily suspend or delay further
activities pending resolution of external contingencies.
Development Not Viable
A discovered accumulation for which there are no current plans
to develop or to acquire additional data at the time due to limited
production potential.
The project is not seen to have potential for eventual
commercial development at the time of reporting, but the
theoretically recoverable quantities are recorded so that the
potential opportunity will be recognized in the event of a major
change in technology or commercial conditions. The project
"decision gate" is the decision not to undertake any further data
acquisition or studies on the project for the foreseeable
future.
PROSPECTIVE RESOURCES
Those quantities of petroleum which are estimated, as of a given
date, to be potentially recoverable from undiscovered
accumulations.
Potential accumulations are evaluated according to their chance
of discovery and, assuming a discovery, the estimated quantities
that would be recoverable under defined development projects. It is
recognized that the development programs will be of significantly
less detail and depend more heavily on analog developments in the
earlier phases of exploration.
Prospect
A project associated with a potential accumulation that is
sufficiently well defined to represent a viable drilling
target.
Project activities are focused on assessing the chance of
discovery and, assuming discovery, the range of potential
recoverable quantities under a commercial development program.
Lead
A project associated with a potential accumulation that is
currently poorly defined and requires more data acquisition and/or
evaluation in order to be classified as a prospect.
Project activities are focused on acquiring additional data
and/or undertaking further evaluation designed to confirm whether
or not the lead can be matured into a prospect. Such evaluation
includes the assessment of the chance of discovery and, assuming
discovery, the range of potential recovery under feasible
development scenarios.
Play
A project associated with a prospective trend of potential
prospects, but which requires more data acquisition and/or
evaluation in order to define specific leads or prospects.
Project activities are focused on acquiring additional data
and/or undertaking further evaluation designed to define specific
leads or prospects for more detailed analysis of their chance of
discovery and, assuming discovery, the range of potential recovery
under hypothetical development scenarios.
Notes to editors
Rose Petroleum plc (http://rosepetroleum.com) is a North
America-focused oil and gas company whose primary asset is
approximately 80,000 net acres in the prolific oil and gas
producing Paradox Basin in Utah, U.S.A., where it is earning into a
75% working interest. Using high-quality data gathered in a 3D
seismic survey completed in October 2017, the Company has
identified drilling locations in naturally fractured areas of the
Paradox Formation with the intention of commencing a drilling
programme in H2 2018.
The Company's established management is supported by an expert
technical team with extensive experience of the basin, where
current operations nearby have proven successful, with significant
initial production rates and low decline rates, offering strong
economics even in the present oil price environment.
The Company's strategy is to grow both organically and through
acquisition, identifying additional hydrocarbon assets,
conventional or unconventional, that would benefit from the
Company's fast-acting, entrepreneurial approach.
Rose Petroleum has been quoted on AIM since June 2004.
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END
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