REG - Pantheon Resources - Validation of frac design and fluid sampling

Pantheon ResourcesAnnouncement

19/10/2023 07:00

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RNS Number : 5958Q  Pantheon Resources PLC  19 October 2023

 

19 October 2023

 

 

Pantheon Resources plc

Validation of revised frac design and successful fluid sampling

 

Pantheon Resources plc (AIM: PANR) ("Pantheon" or the "Company"), the oil and
gas company with a 100% working interest in the Kodiak and Ahpun projects,
with certified contingent resources of over 1 billion barrels of marketable
liquids spanning 193,000 contiguous acres in close proximity to pipeline and
transportation infrastructure on Alaska's North Slope, provides the
following update:

 

Alkaid-2 Re-entry Update

 

The re-entry of the Alkaid-2 well and flow test of the Shelf Margin Deltaic B
("SMD-B") horizon is now complete at the end of the programme to frac, clean
up and flow the well. The Company is pleased to report that testing operations
have been successful at demonstrating producible oil from the SMD horizon in
the Aphun field, which is comprised of both the shallower SMD formation and
the previously tested deeper Alkaid ZOI.

 

As previously announced, going into the SMD data gathering programme, the
Company had three clear objectives:

 

(i)    To assess the efficacy of the revised frac design;

(ii)   To gather representative fluid samples for pressure-volume
temperature analysis ("PVT"), and;

(iii)  To better determine the initial reservoir pressure

 

All three objectives have been successfully achieved:

 

(i)   Post well analysis indicates that the frac treatment resulted in
vertical propagation across the entirety of the the 200 ft gross (100 ft net)
reservoir column and extended laterally some 300-400 ft.

 

The Company's preliminary estimate of the efficiency of the frac was 50% of
theoretical design performance and compares favourably with the calculated
frac efficiency of c.20% experienced in the Alkaid-2 operations in the deeper
ZOI accumulation last year. This improvement was the result of several key
changes to the frac design, as described below, which allowed the frac to
remain within the reservoir and validates the ability to achieve at least the
planned for 2x improvement in frac efficiency in future.

 

(ii)  Multiple fluid samples were gathered indicating a measured gas oil
ratio ("GOR") of 3,000 - 4,000 standard cubic feet per barrel ("scf/bbl") and
an API gravity of 35-36(o). This compares to 12,000 - 13,000 scf/bbl measured
in the deeper Alkaid ZOI. This indicates success in limiting pressure drawdown
and avoiding flashing gas in the reservoir.

 

The Company will have GeoMark conduct recombination analysis on the recovered
fluids from this SMD test, which will provide a comparison to the calculated
GOR range for the Alkaid ZOI of 2,000 - 3,000 scf/bbl.

 

Analysis of the gas samples is ongoing to determine accurate natural gas
liquids ("NGL") yields. The initial estimate of the calorific value of the
produced gas was 1,200 British Thermal Units ("Btu") per standard cubic foot
("scf") compared to approximately 1,000 Btu/scf for pure methane. This
indicates there should be further marketable liquids beyond just the separator
liquid volumes reported.

 

(iii) Initial reservoir pressure was determined to be in the range 3,800 -
4,000 psi and the well has been suspended with a pressure monitoring device to
further refine and confirm this estimate. We anticipate retrieving the
pressure gauge in the next six weeks or thereabouts.

 

During the flow test, after recovery of approximately 60% of the frac fluids,
the oil rate (separator liquids) ranged from more than 100 barrels of oil per
day ("bopd") to 30 bopd (averaging 45 bopd over the 5 days during which oil
was recovered). Water cuts were 90% initially, but declined over time as a
larger share of the frac fluids was recovered. As highlighted before the
operation, the flow rates themselves were not expected to be material because
the objective was to limit drawdown in the initial flow back. However, the
actual flow rates were substantially better than prognosed, given the
conservative approach to production in order to limit gas flashing in the
reservoir and ensure the best quality PVT samples, which bodes well for future
SMD development in the Ahpun Field.

 

Improvement in the frac design included limiting the number of perforations to
achieve treatment rates of 1.5 - 2.0 barrels per minute per perforation, use
of 100 mesh sand, inclusion of micro-emulsion breaking chemicals and lower
overall sand concentrations.

 

Pantheon calculates the frac efficiency as the ratio of the area of the
reservoir exposed to the wellbore vs the theoretical exposure if the treatment
had achieved 100% of its designed outcome. This frac has surpassed the
doubling of efficiency from c.20% achieved in the Alkaid ZOI to c.50%, I.e.
more than the basis upon which the development planning is being modelled. A
more precise efficiency estimate will be possible when the pressure gauge is
pulled from the well. Future wells will provide the opportunity for further
optimization with a view to meeting benchmarks of 80% frac efficiency achieved
in other basins.

 

The location of the Alkaid-2 well was chosen to prioritize the deeper ZOI as
the primary target, and is positioned on the very northern edge of the SMD-B
accumulation, where it begins to shale out. Thus it was always expected to
encounter poorer reservoir quality than in the core of the SMD horizons in the
Ahpun field to the southwest. Expectations for flow rates, water saturations
and water cuts had led to plans for nitrogen lift (necessary to reduce bottom
hole pressure and ensure that fluids were recovered to surface).
Encouragingly, nitrogen injection was not required until the last six days of
the eleven day test, resulting in the operation coming in at or below budgeted
timelines and costs.

 

Ahpun Field Development Update

 

Following this validation of the ability to improve the frac efficiency by
more than 2x compared to the Alkaid-2 long term test, the Company's strategy
to move to regulatory approvals for the Ahpun Field development and to proceed
with a hot tap into the TAPS main oil line has been reinforced. Confirming
producible oil in the SMD, the larger oil accumulation within the Ahpun Field
(which includes the Alkaid ZOI) is significant for the longer-term commercial
implications of developing production infrastructure near the Dalton Highway.

 

The plan targets FID (final investment decision) by the end of 2025 with first
production to follow in early 2026. Estimated costs to first production are
conservatively estimated at $120 million, based on:

 

·    $20 million for the hot tap

·    $20 million for facilities upgrade (including preparing Alkaid-2 for
injection service)

·    $60 million for the first three production wells

·    $20 million for three years of corporate G&A

This cost to reach first production contrasts with other developments in the
region, requiring at least an order of magnitude greater expenditure.
Additional development costs after first production are expected to be funded
through debt or equivalent sources. The Company will provide further updates
on its financing activities, designed to minimize equity or other value
dilution for existing investors, as arrangements progress.

 

Jay Cheatham, CEO, said: "This re-entry operation has provided validation of
our development plans for Ahpun and, in due course, Kodiak, by proving the
efficiency achieved with our next iteration of the optimum frac design. We
have achieved the three core objectives we set for this operation and are now
focused on the next steps in our plan to bring these 100% owned resources into
production, benefitting from the advantages of our location right next to the
Dalton Highway and the TAPS line."

 

David Hobbs, Executive Chairman, said: "Congratulations to Jay and the
operational team on a trouble-free operation that supports the economic case
for developing our entire portfolio of resources. Gathering the last few data
elements for our development planning allows us to move forward at full speed
towards bringing Ahpun on stream in 2026 with Kodiak to follow. We estimate
that we have surpassed the 40% frac efficiency upon which our development plan
was predicated and will aim to achieve substantial further improvements during
the early stages of development."

-ENDS-

 Further information, please contact:

 

 Pantheon Resources plc                                       +44 20 7484 5361
 David Hobbs, Executive Chairman

 Jay Cheatham, CEO
 Justin Hondris, Director, Finance and Corporate Development

 Canaccord Genuity Limited (Nominated Adviser and broker)
 Henry Fitzgerald-O'Connor                                    +44 20 7523 8000

 James Asensio

 Gordon Hamilton

 BlytheRay
 Tim Blythe, Megan Ray, Matthew Bowld                         +44 20 7138 3204

 

 

In accordance with the AIM Rules - Note for Mining and Oil & Gas Companies
- June 2009, the information contained in this announcement has been reviewed
and signed off by David Hobbs, a qualified Petroleum Engineer, who has nearly
40 years' relevant experience within the sector.

 

The information contained within this Announcement is deemed by Pantheon
Resources PLC to constitute inside information as stipulated under the Market
Abuse Regulation (EU) No. 596/2014 as it forms part of UK law by virtue of
the European Union (Withdrawal) Act 2018 ("MAR").

 

 

 

Notes to Editors

 

 

Pantheon Resources plc is an AIM listed Oil & Gas company focused on
developing the Ahpun and Kodiak fields located on state land on the Alaska
North Slope ("ANS"), onshore USA where it has a 100% working interest in
193,000 acres. Certified contingent resources attributable to these projects
exceeds 1 billion barrels of marketable liquids, located adjacent to Alaska's
Trans Alaska Pipeline System ("TAPS").

 

Pantheon's stated objective is to demonstrate sustainable market recognition
of a value of $5-$10/bbl of recoverable resources by end 2028. This will
require targeting Final Investment Decision ("FID") on the Ahpun field by the
end of 2025, building production to 20,000 barrels per day of marketable
liquids into the TAPS main oil line, and applying the resultant cashflows to
support the FID on the Kodiak field by the end of 2028.

 

A major differentiator to other ANS projects is the close proximity to
existing roads and pipelines which offers a significant competitive advantage
to Pantheon, allowing for materially lower infrastructure costs and the
ability to support the development with a significantly lower pre-cashflow
funding requirement than is typical in Alaska.

 

The Company's project portfolio has been endorsed by world renowned experts.
Netherland, Sewell & Associates ("NSAI") estimate a 2C contingent
recoverable resource in the Kodiak project that total 962.5 million barrels of
marketable liquids and 4,465 billion cubic feet of natural gas. NSAI is
currently working on estimates for the Ahpun Field.

 

 

 Glossary of terms

 

BBL - Barrel

BOPD - Barrels of oil per day

BTU - British Thermal Units

GOR - Gas oil ratio

Marketable Liquids - The mix of hydrocarbons exported from Pantheon owned
facilities meeting the specifications for injection into the TAPS main oil
line.

NGL - Natural gas liquids

PVT - Pressure-volume temperature analysis

SCF - Standard Cubic Feet

SMD - Shelf Margain Deltaic

TAPS - Trans Alaska Pipeline System

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