REG - Reabold Resources - Operational and Corporate Update

Reabold ResourcesAnnouncement

27/02/2024 07:00

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RNS Number : 5227E  Reabold Resources PLC  27 February 2024

27 February 2024

 

Reabold Resources plc

("Reabold" or the "Company")

 

Operational and Corporate Update

 

Reabold Resources plc, the investing company focussed on European energy
security, is pleased to provide the following operational and corporate
update.

Reabold aims to improve Europe's energy security by unlocking potential
sources of near-term domestic gas supply, at a time when Europe is exposed to
potentially significant gas supply disruptions.  In this regard, the Company
identified, matured and sold the strategic Victory gas project to Shell U.K.
Limited ("Shell") for £32m (£12.7m net to Reabold). Reabold's current focus
is on its two key gas assets that have strong parallels with Victory, namely
West Newton in the UK and Colle Santo in Italy, where the Company plans to
apply the same successful strategy demonstrated with Victory.

Following the receipt of the final tranche payment from Shell for the sale of
Victory in January 2024, Reabold now holds £9.1m net cash and is therefore
financially well positioned to progress these key assets, as well as
distributing excess cash to shareholders.

 

West Newton

 

Highlights

A proposed well ("WN-A3") planned to be drilled during 2024 will be twinned
with the West Newton A-1 discovery well ("WN-A1") which was not tested

·      The WN-A1 well is interpreted as having a 27 metre gas column
within the Kirkham Abbey formation ("KA Formation"), indicated on well logs

·      The WN-A3 well will be drilled as a directional, high angle well,
offering significant cost savings compared with the previously planned
horizontal well

·      An additional material target in the deeper Permian Rotliegend
Sandstone ("Rotliegend") will also be evaluated

·      Feasibility study underway for a single well development plan for
possible development of WN-A3 well to follow successful testing and well
completion

·      Planning is already in place to drill and produce from the A Site
and other approvals are being accelerated

·      Revised drilling plan is cost-effective with a high chance of
success, offering a rapid early-stage development scenario

Drilling of a first development well (WN-A3) at West Newton (56.3% economic
interest net to Reabold), potentially one of the largest ever UK onshore gas
discoveries, is planned for 2024, subject to the operator, Rathlin (UK) Energy
Limited ("Rathlin"), securing sufficient funding to drill and test the well.
There is an active process underway to assess options to source funding for
Rathlin's share of the cost, including through a farmout, or through further
investment from Reabold, which, following the receipt of the proceeds from
Shell, the Company could potentially provide, in addition to funding its own
share.

Discovery in the Kirkham Abbey Formation Principal Target

The WN-A1 well, drilled in 2013, is interpreted as having encountered 27
metres of potential gas pay at the top of the KA Formation. This figure was
calculated from the Computer Petrophysical Interpretation ("CPI"), using
electrical and mud logs over the interval.

The KA Formation was perforated and cleaned using 15% hydrochloric acid.
After removal of the acidizing work-string and during preparation to run the
production work-string, the well started to flow fluid and the blind rams were
closed for safety reasons to establish control of the well.

The WN-A1 well was subsequently shut in and suspended in accordance with
normal operational and safety procedures after numerous attempts to clean up
were unsuccessful.

The conclusion drawn from these well operations was that due to the severe
damage to the KA Formation, it was not possible to obtain a valid hydrocarbon
production test to surface of the 27 metre pay-zone shown on the CPI log.

Deeper Material Rotliegend Zone Secondary Target

A re-evaluation of the downhole logs of the WN-A1 well by the Joint Venture's
technical teams indicate a possible seven metre gas column in the Rotliegend,
the main reservoir for the prolific UK Southern North Sea Gas Basin gas
fields.

The gas is sourced from the underlying Westphalian and Namurian sediments and
is trapped in structures sealed by the overlying Zechstein evaporites.

Preliminary mapping of the base Zechstein at West Newton indicates low-relief
structures as observed offshore.

The nearest offshore Rotliegend field is the depleted Amethyst complex centred
on block 47/14a within the Southern North Sea Gas Basin, which contained 1.2
tcf of original gas in place, and produced approximately 795 bcf of gas and
5.4 mmbbl of condensate, from a series of low-relief structures trending
South-East to North-West.

Within the UK onshore, the Caythorpe field, approximately 30 kilometres from
West Newton produced 6.67 bcf of gas with associated condensate from the
Rotliegend, displaying porosities up to 19% and permeability up to 500md, with
gas also being produced from the overlying Zechstein.

Calculations for the Rotliegend zone in the WN-A1 well indicate similar
porosities to those seen at Caythorpe. Core was not cut from the WN-A1 well,
however the logs indicate drilling mud invasion over the Rotliegend zone,
which is taken to indicate effective permeability.

Residual gas is also calculated below the base of the seven-metre gas column
in the Rotliegend Sandstone.

West Newton Early Production Plan

A feasibility study is being undertaken by independent energy consultants CNG
Services Limited for a single well gas development and gas export plan
associated with the WN-A3 well, subject to successful testing and completion.

The scope of this West Newton Gas Export Feasibility Study is to determine the
technical and economic viability of a single well development plan, with
production from the WN-A3 well, processed from a modular plant and a 3.5
kilometre pipeline from the West Newton A Site to the National Transmission
System, at an existing above ground installation.

The Company expects that gas production could be brought to market within
months of drilling and testing with a materially reduced capital investment,
providing significant early cash flow whilst additional activity is carried
out on the further development of the West Newton project.

This early production plan is envisaged as a precursor to the conceptual
development plan pursuant to the Company's announcement of 21 June 2022, and
which had an associated pre-tax NPV(10) of US$222m, net to Reabold's interest
 1 .

Colle Santo

Reabold has a 26.1% equity ownership in LNEnergy Limited ("LNEnergy"), which,
in turn has an option to acquire a 90% interest in Colle Santo, a highly
material gas resource located in central Italy, with 65bcf of 2P reserves 2 .
The field is development ready, subject to approvals, with two wells already
drilled and tested. No additional drilling is required prior to commencing
development and LNEnergy believes that the field has the potential to generate
an estimated €11-12m of gross post-tax free cash flow per annum.

The approval process continues to progress for both the full field development
and for the well testing operations. Approval of the full field development
will allow for an estimated 20-year production life using a micro LNG
development solution which has strong environmental credentials, and includes
CO(2) capture and hydrogen production, whilst increasing energy security in
Italy, a political priority in country. Further to the Company's announcement
of 20 December 2023, an Environmental Impact Study for the development plan
was filed with the Ministry of Environment and Energy Security ("MASE") and
the link to this submission can be found
at https://va.mite.gov.it/it-IT/Oggetti/Info/10561
(https://va.mite.gov.it/it-IT/Oggetti/Info/10561) .

In addition, progress has been made on sourcing vendor financing from the
project's Italian EPC contract operator, Italfluid.

The Company notes that LNEnergy's application for concession has been
recognised by MASE, as a project that meets the requirements of the Italian
government's National Integrated Plan for Energy and Climate (PNIEC) and
National Plan for Economic Recovery (PNRR), for which €12 billion in grants
and economic incentives have been made available by executive decree.

Investor Presentation

The Company has published an updated corporate presentation, which shall be
used at the AJ Bell Live Investor evening in Edinburgh on 27 February 2024, as
announced by the Company on 20 February 2024, and is available on Reabold's
website.

Stephen Williams, Co-CEO of Reabold, said:

"After receiving the final tranche of the payment from Shell, Reabold is now
financially well positioned to progress it's two key assets, and in doing so,
contribute significantly to  European gas supply and energy security.

"We are excited by the new phased capex plan at West Newton which could see
production and cash flow much sooner than previously expected, and with
considerably reduced initial capital investment. We anticipate a funding
solution for the drilling of WN-A3 being finalised in the near future, and
this first development well being drilled this year. We are also encouraged by
progress in the approval process at Colle Santo and look forward to updating
shareholders with further updates in due course."

 

ENDS

 

 

This announcement contains inside information for the purposes of the UK
version of the market abuse regulation (EU No. 596/2014) as it forms part of
United Kingdom domestic law by virtue of the European Union (Withdrawal) Act
2018, as amended.

 

For further information, contact:

 

 Reabold Resources plc                                        c/o Camarco

 Sachin Oza                                                   +44 (0) 20 3757 4980

 Stephen Williams

 Strand Hanson Limited - Nominated & Financial Adviser        +44 (0) 20 7409 3494

 James Spinney

 James Dance

 Rob Patrick

 Stifel Nicolaus Europe Limited - Joint Broker                +44 (0) 20 7710 7600

 Callum Stewart

 Simon Mensley

 Ashton Clanfield

 Cavendish - Joint Broker                                     +44 (0) 20 7220 0500

 Neil McDonald

 Pearl Kellie

 Camarco                                                      +44 (0) 20 3757 4980

 Billy Clegg

 Rebecca Waterworth

 Sam Morris

 

Notes to Editors

 

Reabold Resources plc has a diversified portfolio of exploration, appraisal
and development oil & gas projects. Reabold's strategy is to invest in
low-risk, near-term projects which it considers to have significant valuation
uplift potential, with a clear monetisation plan, where receipt of such
proceeds will be returned to shareholders and re-invested into further growth
projects. This strategy is illustrated by the recent sale of the undeveloped
Victory gas field to Shell, the proceeds of which are being returned to
shareholders and re-invested.

 

Glossary of Technical Terms

 

 bcf    billion cubic feet of gas
 md     millidarcy
 mmbbl  million barrels of oil
 npv    net present value
 tcf    trillion cubic feet of gas

 

 

 

 

 

 1  As per competent person's report based on 2C contingent resource compiled
by RPS, June 2022

 2  As per competent person's report compiled by RPS, September 2022

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