REG - Mosman Oil & Gas - Sagebrush Maiden Contingent Resources

Mosman Oil and GasAnnouncement

08/05/2025 07:01

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RNS Number : 8557H  Mosman Oil and Gas Limited  08 May 2025

 

8 May 2025

Mosman Oil and Gas Limited

("Mosman" or the "Company")

 

Sagebrush Maiden Helium and Hydrocarbon Contingent Resources

 

Mosman Oil and Gas Limited (AIM:MSMN) the helium, hydrogen and
hydrocarbon exploration, development and production company, announces the
first estimate of helium and hydrocarbon volumes at the Sagebrush Project in
Colorado, US ("Sagebrush Project").

 

Highlights

 ·             Maiden C2 net best estimate Contingent Resources of 205 million cubic feet
               (mmcf) of helium and 1.7 billion cubic feet (bcf) of hydrocarbon gases at the
               Sagebrush Project as determined by Mosman utilising a report from Four Corners
               Helium LLC ("FCH") dated 5 May 2025 in which seismic interpretation indicates
               a structural closure of circa 585 acres and estimates the initial gas in place
               volume as 18.4 bcf and recoverable gas volume to be 11 bcf ("FCH Report").
 ·             The combination of existing wells, flow tested helium and hydrocarbons, oil
               production infrastructure and an existing gas pipeline provide the ingredients
               to move in stages to a potential fast track helium and hydrocarbon development
               at the Sagebrush Project.
 ·             The fast-track development potential is in addition to the significant
               exploration prospects identified by seismic at both the Sagebrush Project and
               the adjacent Coyote Wash Project.

 

Andy Carroll, Chief Executive Officer of Mosman, said: "This Maiden Contingent
Resource estimates for helium and hydrocarbon gases is a significant
milestone, indicating the existing well could be used to fast-track helium
production in stages.

 

"We have all the key ingredients for assessing future development potential
with an existing well, gas composition, production facilities and a gas
pipeline.

 

"We are now working on a development feasibility study that will likely
include recompletion of the well and an extended flow test, as well as design
of production facilities for selling helium via road tanker or pipeline and
using the hydrocarbons for power generation and/or sale.

 

"In addition, at the nearby and separate Coyote Wash Project, the structures
at its various Leadville prospects appear on 3D seismic to be larger than the
structure mapped at the Sagebrush Project. We will now also commence work on a
separate internal resource estimate for the Coyote Wash leases using the
Sagebrush data. Given their proximity, these two Projects represent a
compelling combination given the data, logistics and potential development
synergies."

 

Sagebrush Project

 

The Sagebrush Project is in the Four Corners region in Colorado, US which is
an area of established helium production from the Leadville formation
carbonates from fields such as Doe Creek, 50 miles to the north of the
Sagebrush Project.

 

The Sagebrush Project current oil production is circa 40 bopd (gross) from 7
wells which enable the 10,000 leased acres to be Held By Production. Mosman
has existing well data, oil production records and seismic data and recently
received test data from the Sagebrush-1 well drilled in 1993 from the previous
operator where a drill stem flow test ("DST") conducted in the Leadville
Formation flowed gas with 2.76% helium, 34.5% nitrogen, 39.9% carbon dioxide,
19.5% methane and circa 3% other petroleum gases.

 

At current market prices, the main value of the gas is the helium. The
hydrocarbons may have value either for sale or avoiding costs by onsite power
generation.

 

The data has been evaluated by an experienced team of consultants at FCH. The
scope of its work includes a detailed petrophysical evaluation of Sagebrush-1
well logs and offset wells in addition to interpretation of the recently
reprocessed 2D seismic swath data to determine the area of closure and
reservoir parameters.

Seismic Interpretation depth contour map of top of Leadville formation with
Sagebrush-1 location (shown as a dot and circle). White dotted line shows area
of closure (Source: FCH)

 

Contingent Resources

 

Resource Estimate

 

Mosman has utilised the FCH Report to estimate net C2 Best Estimate Contingent
Resources. The resource assessment has been conducted in accordance with
standard principles of Petroleum Resource Management (PRMS) which specifically
applies to oil and gas reserves and has been deemed suitable for helium by the
SPE.

 

Mosman notes the relevant reservoir zone has been drilled, logged and
demonstrated to flow and the existing well is cased and cemented across the
relevant zones, and that seismic data has been interpreted to determine the
size of the structure. However, more work is required to demonstrate the
optimal development, costs and markets, and is currently insufficient to
assess commerciality. Work has already started to be able to determine
commerciality and to be able to make a final investment decision ("FID") with
the initial objective to put this well on production and thereafter determine
the commerciality of additional development wells.

 

Risk

 

The Sagebrush-1 well flowed and tested helium and hydrocarbon gas in
volumetrically significant percentages and shut-in pressures indicated a
reservoir that extended beyond the immediate area of the wellbores. The
extrapolation of well data to the larger area of closure has some risk and,
therefore, the Geological Chance of Success for the Contingent Resource
(P(g)) is deemed to be 0.75.

 

Given the favourable location, existing well, infrastructure and helium
markets, the probability of commerciality is high, estimated to be 0.7
(P(com)).

 

Contingencies

 

Five main contingencies identified for the Sagebrush Project development
are:

 

 1)  Drilling & Testing: There is a requirement for more flow testing to

     a)                                    establish if the untested zones (such as the Lower Leadville) will flow, and
                                           the gas composition in those zones.

     b)                                    determine reservoir pressure and flow rates over a longer time period, as the
                                           DST flow period was limited and mud damage appeared to be cleaning up with
                                           higher flow rate over time and pressure still rising when DST ended.

 

Once reliable production data is available, the viability of production from
the existing well and the number of wells required to be drilled to
economically produce the Sagebrush Project can be determined, including
understanding of the method of helium and hydrocarbon gas separation. Then a
field development plan can be prepared and the contingent resources may be
converted to reserves.

 

 2)  Corporate: There has been no final investment decision made by the Company to
     move forward the Sagebrush Project as a commercial development. The gathering
     of additional technical data, preparation of a detailed field development plan
     and associated detailed cost estimates are required to establish the
     commerciality of the project to make a final investment decision.

 3)  Lease: The current lease may be extended beyond the current 2030 end date for
     the Company to be able to make a final investment decision.

 4)  Market Access: There is a viable helium and hydrocarbon gas market in
     Colorado. Gas separation facilities, transport and sales contracts are
     required for the product to be sold.

 5)  Confirmation of commerciality: Once a field development plan is designed and
     capital and operating costs are known, only then can economics be calculated
     to determine commerciality and a final reserve determination made.

 

Table 1: Contingent Resources at Sagebrush lease area

 

 Contingent Resources C2 Best Estimate (mmcf)
                       Hydrocarbons                     Helium
 Sagebrush                      2,508                       305
 less 18.67% royalty            468                         57
 Net of Royalty                 2,040                       248
 Mosman 82.5% (net)

                                1,683                       205
 Source: Mosman estimates
 Notes
 1. The estimated quantities of gas that may potentially be recovered by the
 application of a future development project(s) relate to undeveloped
 accumulations. These estimates have a risk of development. Further appraisal
 and evaluation are required to determine the optimal development plan and
 commerciality.
 2. The natural gas resource estimates have been derived in accordance with
 the principles of the Petroleum Resources Management System (PRMS). The PRMS
 specifically applies to petroleum. However, the Oil and Gas Reserves Committee
 of the Society of Petroleum Engineers (SPE) advised in August 2022 that
 although the gaseous extraction of natural hydrogen and helium is outside of
 the scope of the PRMS, the principles can be applied given the similarities in
 exploration, evaluation and exploitation.
 3. The resource estimates are presented on a net entitlements basis and
 represent Mosman's net economic interest in the prospective recoverable
 hydrogen and helium volumes after deductions for an 18.67% royalty and the
 82.5% working interest
 4. The Contingent Resources have been evaluated using deterministic methods
 and represent C2 best estimates. A low case and high case were not estimated.
 5. The estimates are for naturally occurring gas only. Adjustments for
 petroleum gases and inert gases have been made. No adjustment has been made to
 the estimates to account for fuel and flare

 

 

Figure 1 Map of Sagebrush-1 well and Sagebrush and Coyote Wash leases (Source:
Mosman)

 

The FCH Report notes the potential for a dual target Ismay oil and Leadville
helium prospect, based on seismic interpretation. This is significant as it
may enhance the economics of drilling and development of the Sagebrush
Project.

 

The FCH Report notes that the Sagebrush-1 well reported fluorescence in the
Lower Leadville, and this zone has not been included in the resource estimate
as it was not flow tested.

 

The FCH Report also notes that the Sagebrush-1 well provides important data
for assessing the Coyote Wash Project, especially as it confirms the presence
of helium and the reservoir potential of the Leadville formation in this area.

 

Future Work Plan:

 

In addition to the plans to acquire 3D seismic, the current basis for near
term planning is expected to include an extended flow testing of the Leadville
formation at the Sagebrush-1 well. This may also include flow testing the
Lower Leadville formation.

 

Work has already started on a development plan that is anticipated to take
several months to determine the commercial feasibility of development.

 

Qualified Person Statement

The information contained in this announcement has been reviewed and approved
by Andy Carroll, a Director and Chief Executive Officer for Mosman, who has
over 35 years of relevant experience in the oil and gas industry and is a
Member of the Society of Petroleum Engineers.

 

The current intention is that this resource estimate by Mosman will be
followed up with an external independent consultant's report to assist in any
potential future development decision.

 

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 information is
now considered to be in the public domain.

 

 

Enquiries:

 Mosman Oil & Gas Limited                                             NOMAD and Joint Broker

 Andy Carroll                                                         SP Angel Corporate Finance LLP

 CEO                                                                  Stuart Gledhill / Richard Hail / Adam Cowl

 acarroll@mosmanoilandgas.com (mailto:acarroll@mosmanoilandgas.com)   +44 (0) 20 3470 0470

 Alma                                                                 Joint Broker

 Justine James / Will Merison                                         CMC Markets UK Plc

 +44 (0) 20 3405 0205                                                 Douglas Crippen

 mosman@almastrategic.com (mailto:mosman@almapr.co.uk)                +44 (0) 020 3003 8632

 

Updates on the Company's activities are regularly posted on its
website: www.mosmanoilandgas.com (http://www.mosmanoilandgas.com/)

 

 

Glossary

 boe                       Barrels of oil equivalent based on calorific value as opposed to dollar value
 boepd                     Barrels of oil per day of oil equivalent based on calorific value as opposed
                           to dollar value
 bopd                      Barrels of oil per day
 Contingent Resources      Those quantities of petroleum which are estimated, on a given date, to be
                           potentially recoverable from known accumulations but which are not currently
                           considered to be commercially recoverable.
 Gross Project Production  Means the production of BOE at a total project level (100% basis) before
                           royalties (where Mosman is the Operator) and where Mosman is not the operator
                           the total gross production for the project
 Hydrocarbons              Hydrocarbons are chemical compounds consisting wholly of hydrogen and carbon.
 Known Accumulation        The term accumulation is used to identify an individual body of moveable
                           petroleum. The key requirement to consider an accumulation as known, and hence
                           contain reserves or contingent resources, is that each accumulation/reservoir
                           must have been penetrated by a well. In general, the well must have clearly
                           demonstrated the existence of moveable petroleum in that reservoir by flow to
                           surface or at least some recovery of a sample of petroleum from the well.
                           However, where log and/or core data exist, this may suffice, provided there is
                           a good analogy to a nearby and geologically comparable known accumulation.
 Mcf                       Thousand cubic feet
 Bcf                       Billion cubic feet
 Mcfpd                     Thousand cubic feet per day
 MBtu                      One thousand British Thermal Units
 MBtupd                    One thousand British Thermal Units per day
 MMBtu                     One million British Thermal Units
 MMBtupd                   One million British Thermal Units per day
 Mmcf                      One million cubic feet
 Net, Net Production       Net to Mosman's Working Interest; Net Production attributable to Mosman means
                           net to Mosman's Working Interest before royalties
 SPE                       Society of Petroleum Engineers
 SPE PRMS                  A standard for the definition, classification, and estimation of hydrocarbon
                           resources developed by the Oil and Gas Reserves Committee of the Society of
                           Petroleum Engineers and named the Petroleum Resource Management System

 

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