REG - Pennpetro Energy PLC - PPP signs farm-in to Drill New Production Well

Pennpetro EnergyAnnouncement

28/03/2023 08:00

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RNS Number : 4430U  Pennpetro Energy PLC  28 March 2023

Pennpetro Energy PLC

("Pennpetro" or the "Company")

 

Pennpetro signs Horse Hill farm-in to Drill New Production Well

 

London, 28 March 2023 - Pennpetro Energy PLC (LSE: PPP), an independent oil
and gas company focusing on production and development in Gonzales County,
Texas, USA, today announces that it has signed a binding term sheet
("Agreement") with UKOG (137/246) Ltd and Horse Hill Developments Ltd
("HHDL"), both subsidiaries of UK Oil & Gas plc (collectively "UKOG") to
farm-in and drill the next infill oil production well at the Horse Hill Oil
Field ("Horse Hill"), located about 2 km north of Gatwick airport.

 

The Agreement covers Horse Hill and its surrounding PEDL137 and PEDL246
licences ("Licences") covering an aggregate area of 142.9 km².

 

The Agreement's binding farm-in terms, which are subject to certain conditions
as outlined below, cover the drilling of a new crestal infill well, designated
Horse Hill-3 ("HH-3"), to be spudded after the completion of a Pennpetro
funded high-definition 3D seismic survey. On completion of HH-3, Pennpetro
will receive a 49% share of all production derived from Horse Hill-3 and
future wells plus a 49% interest in the Licences. UKOG's subsidiaries will
retain their current interests in all oil production from Horse Hill-1
("HH-1") and HHDL will remain as the named Licence operator.

 

Tom Evans, Pennpetro's CEO, commented: "We see an excellent opportunity here
for Pennpetro to participate in the next phase of developing the Horse Hill
Oil Field. We look forward to moving ahead with the planned high-resolution 3D
seismic survey as soon as practicable and then moving forwards to the next
production well at Horse Hill."

 

About Horse Hill Oil Field

 

Following its discovery in 2014, Horse Hill was successfully production tested
in the Upper Portland sandstone and underlying Kimmeridge limestone section
from 2016 through to the start of long-term continuous Portland production in
2020. UKOG advise that, as of mid-March 2023, continuing oil production from
HH-1 totals an aggregate of over 185,000 barrels of 35˚- 41˚ API sweet
crude. Full planning and environmental consents are in place for four
additional infill production wells.

 

A 2018 Xodus CPR for UKOG estimated a gross mid case P50 Portland oil in place
("OIP") of 30 million barrels, with a corresponding mid-case 2C recoverable
Contingent Resource of 1.5 million barrels. The estimated mid case 5% recovery
factor being stated as in accord with other analogous fields in the Weald
Basin. It should be noted that the total HH-1 Portland production to date
potentially leaves around 1.36 million barrels of the estimated mid-case
recoverable Portland resource available to infill drilling and remaining HH-1
production.

 

In addition to the 132,000 barrels of 35-36˚ API Portland continuous
production, approximately 53,000 barrels of 41˚ API sweet crude were produced
from multiple zones within the Kimmeridge limestones during production
testing, before being shut in to allow for longer term Portland production. In
2015 a Schlumberger report calculated an estimated mean OIP of 8.262 billion
barrels lying within the entire Kimmeridge section underlying the Licences.
Note: OIP should not be construed as either recoverable Contingent resources
or Reserves. The Kimmeridge therefore remains a potentially viable secondary
production target at Horse Hill.

 

About UKOG

 

UKOG, listed on AIM, is a forward-thinking energy company transitioning from
oil and gas into the hydrogen energy space. Its portfolio includes the
development of 40 billion cu feet of recoverable gas at Loxley, the UK
onshore's largest remaining tested gas resource, stable oil production from
Horse Hill and Horndean, plus the 305 km² Resan Licence in SE Turkey where
the latest well targeting the shallow Pinarova structure, located beneath a
recently discovered active surface oil seep, is expected to spud shortly. In
May 2022 it announced its intention to build an integrated hydrogen hub,
centred around the UK's largest planned underground salt cavern hydrogen
storage facility, all strategically located in Southern England at Portland
port in Dorset. It is a member of the Solent Hydrogen Cluster and is actively
engaged with government on the future design and operating model of hydrogen
storage.

 

Transaction Conditions Precedent

 

1.    The Transaction is conditional on the following conditions having
been satisfied or waived on or before the date that falls six months from the
date of this term sheet (the Longstop Date):

1.1.       the Parties entering into a farm-out 1  agreement in agreed
form (Farm-out/Farm-in Agreement);

1.2.       if required, all applicable and necessary consents,
authorities or approvals required from any applicable statutory or
quasi-statutory body regulating the oil and gas industry in the United Kingdom
having been obtained;

1.3.       HHDL having obtained all applicable and necessary approvals
from its shareholders approving the Transaction;

1.4.       the board of HHDL having approved the Transaction;

1.5.       the board of UKOG having approved the Transaction; and

1.6.       Pennpetro having obtained all applicable and necessary
approvals from its shareholders.

2.    Completion of the Stage 1 Farm-out/Farm-in is conditional on:

2.1.       the conditions in paragraph 1.1 having been satisfied or
waived on or before the Longstop Date;

2.2.       Pennpetro having provided 100% of the funding required in
order to complete the Seismic Survey; and

2.3.       the Parties entering into the following documents in agreed
form: (i) assignment of Stage 1 Farm-out/Farm-in Interest; (ii) deed of
assignment and novation in respect of the Stage 1 Farm-out/Farm-in Interest;
(iii) deed of adherence in respect of the Licence Document.

3.    Completion of the Stage 2 Farm-out is conditional on:

3.1.       the conditions in paragraph 1.1 having been satisfied or
waived on or before the Longstop Date;

3.2.       Stage 1 Farm-out/Farm-in having completed;

3.3.       Pennpetro having provided 100% of the funding required in
order to complete the Farm-out Programme;

3.4.       the Farm-out/Farm-in Programme having completed and Horse
Hill-3 having been drilled; and

3.5.       the Parties entering into the following documents in agreed
form: (i) assignment of Stage 2 Farm-out/Farm-in Interest; (ii) deed of
assignment and novation in respect of the Stage 2 Farm-out/Farm-in Interest.

  -ENDS-

 

This announcement contains inside information within the meaning of Article
7(1) of (i) Regulation (EU) No 596/2014 of the European Parliament and of the
Council of 16 April 2014, as amended (the "EU Market Abuse Regulation") and
(ii) the EU Market Abuse Regulation as it forms part of United Kingdom
domestic law by virtue of the European Union (Withdrawal) Act 2018.

 

ENQUIRIES:

 

 Pennpetro Energy PLC:

 Tom Evans, CEO                                                                                                   tme@pennpetroenergy.com (mailto:tme@pennpetroenergy.com)

 Brokers:                                                                                                         +44 (0) 207 614 5900

 Zeus Capital

 Simon Johnson

 Peterhouse Capital Limited

 Lucy                                                                                                             +44 (0) 20 7469 0930
 Williams

                                                                                                                +44 (0) 20 7220 9797
 Duncan
 Vasey
 Media and Investor Relations:

 Instinctif
 Partners

                                                                                                                pennpetro@instinctif.com (mailto:pennpetro@instinctif.com)
 Galyna Kulachek

                                                                                                                +44 (0) 20 7457 2020
 Isadora Pegler

 

NOTES TO EDITORS:

 

Pennpetro Energy is an independent oil and gas company focusing on production
in the Gonzales Oil Field in Texas, USA. Shares in the company were admitted
to the Official List of the London Stock Exchange by way of a Standard Listing
on 21 December 2017 with the ticker symbol "PPP". Its wholly owned subsidiary,
Nobel Petroleum USA Inc. has a Participation, Development and Option Agreement
and Joint Operating Agreement with Texas based Millennium PetroCapital
Corporation over a 250,000 acre Area of Mutual Interest in Gonzales County,
Texas, aimed at exploiting the prolific proven Austin Chalk oil and gas play.

 

Further information on the Company can be found at www.pennpetroenergy.co.uk

 

 

(( 1 )) Farm-out refers to UKOG disposing of a beneficial interest and refers
to Pennpetro acquiring a beneficial interest.

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