REG - Prospex Energy PLC - Viura-1B Well Flow Rates Exceed Expectations

Prospex EnergyAnnouncement

16/12/2024 07:00

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RNS Number : 1275Q  Prospex Energy PLC  16 December 2024

16 December 2024

 

Prospex Energy plc

 

("Prospex Energy" or the "Company")

 

Viura-1B Well Flow Rates Exceed Pre-Drill Expectations Doubling

 Prospex's Net Production and Revenues

 

Prospex Energy plc (AIM:PXEN), the investment company focused on European gas
and power projects, is very pleased to report the flow rates achieved from the
flow testing of the recently drilled and completed Viura-1B development well
in northern Spain, which have exceeded pre-drill expectations.

 

Highlights:

·    Viura-1B has been completed and it is being tested, having achieved
flow rates up to 500,000 scm/d (17.7 MMscfd), which is 72,000 scm/d
(2.6 MMscfd) net to Prospex.

·    The gas from the flow testing has already been sold on the market.

·    The Viura-1B well will now be placed on long term production at a
stabilised plateau rate of 300,000 scm/d (10.6 MMscfd), which is
43,000 scm/d (1.5 MMscfd) net to Prospex.

·    Prospex's net production has more than doubled since the beginning of
December to ≈82,000 scm/d or ≈2.9 MMscfd.

·    This production increase does not include the production from the
existing Viura-1ST3 well which has been producing intermittently since mid
October at rates up to 200,000 scm/d (7.1 MMscfd), which is 29,000 scm/d
(1.0 MMscfd) net to Prospex, as water handling issues are managed until the
completion of the current workover on the Viura-3 water injection well.

·    Recent increased energy prices in Europe have resulted in much higher
revenues from the Company's investments.

·    Enhanced production income will make an important contribution to
continued expansion, with eleven further wells planned in the next 18 months
to two years across Prospex's three onshore production concessions in Spain
and Italy, and prospective blocks identified for acquisition in Poland.

 

Mark Routh, the CEO of Prospex, commented:

"The Viura-1B well test flow rates have exceeded pre-drill expectations from
the larger than prognosed reservoir section of the main Viura reservoir
target.  The flow rates confirm the success of this development well with the
added bonus that the gas produced from the flow tests has already been sold to
the market and that the well is being put on long-term production at a rate of
300,000 scm/d which is 10.6 MMscfd (43,000 scm/d or 1.5 MMscfd net to
Prospex).  This and the production from the existing Viura-1ST3 well has more
than doubled Prospex's net production - directly accruing revenues to the
Company's investments as our gas and generated electricity are sold into the
burgeoning European energy markets.

 

"More than doubling the production and therefore the revenue from our
producing assets will put Prospex on an extremely sound footing to be able to
fund its expansion plans of the eleven new wells currently going through
permitting process on our approved onshore production concessions in Spain and
Italy.  It will also facilitate our proposed expansion plans onshore in
Poland where we expect to be providing further news on the licence
applications in the New Year."

 

 

Further Information

Prospex owns 7.2365% of the Viura field through its ownership of 7.5% of HEYCO
Energy Iberia S.L. ("HEI").  Prospex is receiving 14.473% of the production
income from the Viura gas field until payback of its capital investment
(expected to be ≈£8 million) plus the accrued 10% p.a. interest thereon.

 

The Viura-1B well has been connected to the existing gas processing facilities
at the Viura gas plant and the gas from the flow testing has been sold on the
market since the flow testing commenced on 29 November 2024.  Therefore, the
Company has been accruing its share of that production income which will now
continue as the well is placed on long-term production on completion of the
flow testing programme.

 

Three zones have been completed and tested in the main reservoir target of the
Utrillas-A formation in the Viura-1B well.  The maximum flow rate achieved on
test was 500,000 scm/d, which is 17.7 MMscfd (72,000 scm/d or 2.6 MMscfd
net to Prospex).  At the conclusion of the multi-rate flow testing and
pressure build-up measurement programme the well will be placed on long term
production at a stabilised plateau rate of 300,000 scm/d, which is
10.6 MMscfd (43,000 scm/d or 1.5 MMscfd net to Prospex).

 

At these rates, as from the beginning of December 2024, Prospex's total
accrued net daily production from its Spanish and Italian portfolio has more
than doubled from ≈38,000 scm/d or ≈1.3 MMscfd to ≈82,000 scm/d or
≈2.9 MMscfd.  This enhanced production income from the three onshore
revenue generating production assets is being accumulated to fund the drilling
programmes on Prospex's three onshore production concessions on which there is
a total of eleven further wells planned in the next 18 months to two years:

 

·    The Viura Gas concession, northern Spain - two further development
wells planned into the proven, developed producing Viura gas field in Q1/Q2
2025, one of which already has the full permit to drill approved.  These two
new production wells Viura-3B and Viura-3A will be placed on immediate
production in the same way as the recently drilled Viura-1B well.

 

·    The Selva Malvezzi concession, northern Italy - permit applications
have been submitted to drill four further wells; two development wells into
structures classified as contingent resources, North Selva and South Selva and
two exploration wells classified as prospective resources, East Selva and
Riccardina.  These wells, which are targeting a total of 88 bcf gross
(33 bcf net to Prospex), are anticipated to receive permits to drill in the
second half of 2025.

 

·    The El Romeral concessions, southern Spain - permit applications have
been submitted to drill five further wells, two development wells into
structures classified as contingent resources Sevilla-3E and Santa Clara-2 and
three exploration wells Nuevo Gamo, Santa Rita and Romeral-2S classified as
prospective resources.  These five wells are targeting a total of 18.2 bcf
gross (9.1 bcf net to Prospex).  The Company hopes to receive permits to
drill these five new wells by the end of 2025.

 

Prospex has also identified and hopes to acquire prospective blocks in Poland,
which meet the Company's stringent investment criteria; namely, areas which
have proven gas production, high potential prospectivity in the targeted
geological horizons, high potential for new reserves to be unlocked and can be
brought onstream within two to three years.

 

For further information, please contact:

 

 Mark Routh                        Prospex Energy PLC            Tel: +44 (Tel:+44) (0) 20 7236 1177
 Ritchie Balmer                    Strand Hanson Limited         Tel: +44 (0) 20 7409 3494

Rory Murphy

                                 (Nominated Adviser)
 David Asquith
 Andrew Monk (Corporate Broking)   VSA Capital Limited           Tel: +44 (0) 20 3005 5000

Andrew Raca (Corporate Finance)
 Ana Ribeiro / Charlotte Page      St Brides Partners Limited    Tel: +44 (0) 20 7236 1177

 

Further information on the Company can be found on its website at
www.prospex.energy (http://www.prospex.energy) .

 

Notes

Prospex Energy PLC is an AIM quoted investment company focused on high impact
onshore and shallow offshore European opportunities with short timelines to
production.  The Company's strategy is to acquire undervalued projects with
multiple, tangible value trigger points that can be realised within 12 months
of acquisition and then applying low-cost re-evaluation techniques to identify
and de-risk prospects.  The Company will rapidly scale up gas production in
the short term to generate internal revenues that can then be deployed to
develop the asset base and increase production further.

 

The Company currently has three non-operated, revenue generating, onshore
producing gas investments in Europe with low operational risk:

•     Selva Malvezzi, northern Italy (37% interest)

•     El Romeral gas to power plant, southern Spain (49.9% interest)

•     Viura Gas Field, northern Spain (7.24% interest)

 

Prospex also owns a 15% interest in the Tesorillo Exploration Permit in
Southern Spain, with the option to increase to 49.9% and has identified and
hopes to acquire prospective blocks in Poland, which meet the Company's
stringent investment criteria.

 

The Company has no debt finance outstanding.

 

Net after-tax cash flows are as far as possible and where appropriate,
retained within the Company's investment vehicles to fund expected future
development costs therein and limit foreign exchange risk.

 

About Viura:

The Viura-1B development well, which has been drilled by HEYCO Energy Iberia
S.L. ("HEI"), reached its revised targeted Total Depth ("TD") of 4,500 metres,
which is ≈4,100 metres True Vertical Depth ("TVD"), on 21 October 2024 in
the 6-inch hole section of the bottom 450 metres of the well.  Prior to
drilling the current Viura-1B well, the Viura producing gas field onshore in
northern Spain had an estimated gross original gas in place of 211 Bcf (6 Bcm)
and estimated reserves of 105 Bcf (3 Bcm).  To date, just 16 Bcf (0.5 Bcm) of
gas has been produced from Viura meaning that the remaining reserves were
estimated as 90 Bcf (2.5 Bcm), which is 6.5 Bcf (0.18 Bcm) net to Prospex.

The Viura-1B well was deepened by 450 metres in order to appraise the
undrilled Utrillas-B formation and assess if it was gas bearing.  Having
confirmed the presence of gas-bearing reservoir quality sandstones in the
Utrillas-B, the operator completed this interval with a cemented 4½ inch
liner.  The flow testing programme for the Utrillas B section will be
performed during the planned plant shut-down in H2 2025.

The drilling rig has been moved from the Viura-1B well site location to the
produced water disposal well Viura-3 site and operations are underway to
re-instate its operability to better manage produced water from the existing
Viura-1 ST3 production well.

Following the shut-in of the Marismas gas concession for its conversion to a
gas storage facility, there are now only two producing onshore gas fields in
Spain: El Romeral and Viura.  Prospex is a co-owner in both of these
concessions.  Prospex owns a 49.9% share of the El Romeral concessions and a
7.2365% of the Viura concession.

HEI currently has a 58.7964% interest in Viura.  The other participants in
the ownership of the Viura Field Development are Sociedad de Hidrocarburos de
Euskadi, S.A. ("SHESA") (owner of the 37.6901% of the Concession) and Oil and
Gas Skills, S.A. (owner of the 3.5135% of the Concession).  On 5 April 2024,
HEI entered into an asset purchase agreement with SHESA for the acquisition of
the participation of SHESA in the Viura Field Development, which is subject to
the fulfilment of certain conditions precedent.  Prospex through its 7.5%
shareholding in HEI indirectly owns 7.2365% of the Viura concession, its
reserves and the existing surface production facilities of the Viura gas
plant, which is connected to the Spanish national grid.

HEI acquired its interest in the Viura gas field and became operator in
2022.  A new 3D seismic survey was acquired in 2013.  There is one well in
production in the field Viura-1 ST3, which had been shut in until recently.
This well produces intermittently as water production is managed.  There is a
workover now underway on the existing produced water disposal well Viura-3 to
reinstate its operability.  HEI has permits in place to drill one further
development well, Viura-3B, scheduled to start in the second quarter of
2025.  Permits have been submitted to drill a third development well on the
concession Viura-3A batch drilled with Viura-3B well in Q2 2025.

The Viura-1B well commenced drilling operations on 22 June 2024.  The new
investors (including Prospex) into HEI are funding 31.58% of the development
costs to earn 15.79% ownership of HEI.  Prospex is funding 15% of the
development costs of the HEI development programme comprising the current well
in 2024 and the proposed 2025 two well drilling programme to earn 7.5%
ownership of HEI and indirectly 7.2365% of the Viura asset.

Other new investors are funding 16.58% of the development costs to earn an
8.29% ownership in HEI.

The two new wells to be drilled from the first half of 2025 and completed in
the second half of 2025 are to be funded from revenues from existing and new
production from Viura or from new funds if required.  Since 29 November 2024,
Viura-1B has been generating revenues from production from the start of the
testing programme.  The 2025 development programme is to be funded by future
cash calls or from Phase 1 production or both.

There is a preferred pay-back mechanism for Prospex and all participants
(including HEGI and new investors) of this new investment in HEI, the ("HEI
Investors").  The HEI Investors will enjoy a 10% interest on their capital
investments paid out from the existing and future production from Viura.
Until the HEI Investors have recovered their full capital commitments, plus
the 10% preferred interest return, HEGI will not receive production income on
their other 50% ownership of HEI over and above operating expenses and an
allowance for Spanish taxes and royalties.  This means that Prospex will earn
14.473% of the revenues from the gas production from the Viura field until it
has achieved payback of its total expected ≈£8 million capital
investment.  The gross cost (including the current Viura-1B well which has
already been funded) of the three phase, three-year Viura development
programme is estimated at a total of £55.4 million ($70.4 million).  HEGI is
funding over 50% of that programme and the new HEI Investors are funding
31.58% through their interest in HEI which earns them an indirect 15.2368%
ownership of the Viura asset (net 7.2365% to Prospex).

Qualified Person Signoff

In accordance with the AIM note for Mining and Oil and Gas Companies, the
Company discloses that Mark Routh, the CEO and a director of Prospex Energy
plc has reviewed the technical information contained herein.  Mark Routh has
an MSc in Petroleum Engineering and has been a member of the Society of
Petroleum Engineers since 1985.  He has more than 40 years of operating
experience in the upstream oil and gas industry.  Mark Routh consents to the
inclusion of the information in the form and context in which it appears.

Glossary:

scm                        Standard cubic metres

scm/d                   Standard cubic metres per day

MMscm               Million standard cubic metres

MMscm/d           Million standard cubic metres per day

Bcm                       Billion standard cubic metres

Bcf                          Billion standard cubic
feet

MMscfd               million standard cubic feet per day

MWh                     Mega Watt hour

TTF                         The 'Title Transfer
Facility' - a virtual trading point for natural gas in the Netherlands.

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