REG - TomCo Energy PLC - Reserves Report for TSHII Site

TomCo EnergyAnnouncement

13/01/2022 07:05

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RNS Number : 2836Y  TomCo Energy PLC  13 January 2022

13 January 2022

TOMCO ENERGY PLC

("TomCo" or the "Company")

 

Reserves Report for TSHII Site

TomCo Energy plc (AIM: TOM), the US operating oil development group focused on
using innovative technology to unlock unconventional hydrocarbon resources, is
pleased to announce the receipt of an independent report commissioned from
Netherland, Sewell & Associates, Inc. ("NSAI") estimating the oil
reserves, associated marketable sand volumes, and future net revenue, as of 31
December 2021, in respect of a potential commercial scale project on the
mining properties comprising the Tar Sands Holdings II LLC ("TSHII") site
located in the Uinta Basin, Utah, United States (the "Report").  As
previously announced, TomCo's wholly owned subsidiary, Greenfield Energy LLC,
("Greenfield"), owns a 10% Membership Interest in TSHII with an exclusive
option, at its sole discretion, to acquire the remaining 90% of the Membership
Interests for additional cash consideration up to 31 December 2022.

 

Highlights

·    NSAI have estimated the proved ("1P"), proved plus probable ("2P"),
and proved plus probable plus possible ("3P") oil reserves, associated
marketable sand volumes, and future net revenue, as at 31 December 2021 in
respect of a 100 per cent. interest in a potential commercial scale project on
the mining properties comprising the TSHII site

·    NSAI estimate 1P oil reserves of 22.8 million barrels of oil
("bbls"), 2P oil reserves of 33.6 million bbls and 3P oil reserves of 44.3
million bbls

·    NSAI further estimate associated volumes of marketable sand at 22.8
million tonnes (1P), 41.2 million tonnes (2P) and 59.8 million tonnes (3P)

·    Total estimated undiscounted future net revenues (as described
further below) range from US$942 million based on 1P reserves to approximately
US$2.5 billion based on 3P reserves in respect of a gross 100% interest in
TSHII

·    Estimated discounted future net revenues (as described further below)
attributable to TomCo's current 10 per cent. interest in TSII range from
approximately US$30.5 million based on 1P reserves to approximately US$57.6
million based on 3P reserves

 

Commenting, John Potter, CEO of TomCo, said: "We are delighted with the
findings of NSAI's Report.  The Report serves to confirm our view that the
TSHII site contains substantial economic resources, both in terms of oil and
marketable sand, that we are focussed on seeking to exploit.

"Greenfield continues to progress its previously announced plans to pursue
both the drilling of certain near-term oil production wells and, thereafter,
the potential acquisition of the balancing 90% of the Membership Interests in
TSHII and construction of its first commercial scale plant on the site, all of
which remain subject to securing the requisite funding. We look forward to
providing further updates in due course."

 

Report Details

NSAI have estimated the proved (1P), proved plus probable (2P), and proved
plus probable plus possible (3P) oil reserves, associated marketable sand
volumes, and future net revenue, as of 31 December 2021 in respect of a 100
per cent. Interest in a potential commercial scale project situated on the
mining properties comprising the TSHII site in the Uinta Basin, Utah, United
States.

 

The Report was prepared using certain price and cost parameters specified by
TomCo. The reserves estimates in the Report were prepared in accordance with
the definitions and guidelines set out in the 2018 Petroleum Resources
Management System ("PRMS") approved by the Society of Petroleum Engineers
("SPE"). Although marketable sand volumes are not hydrocarbons, NSAI used the
2018 PRMS as the framework for the categorisation of such volumes and their
associated revenues.

 

In the first half of 2021, Greenfield operated Petroteq Energy Inc's existing
oil sands pilot plant at Asphalt Ridge, Utah (the "POSP") in order to
demonstrate the feasibility of mining shallow tar sands using conventional
open pits and applying solvents to extract, process, and sell heavy oil.
Having demonstrated pilot viability, Greenfield has subsequently begun to
negotiate marketing contracts for refining and marketing asphalt, heavy oil
and diesel. The potential future mining operations and extraction processes at
TSHII are also intended to produce various types of sand as byproducts, and
Greenfield has identified markets for the industrial, construction, fracture
stimulation ("frac") and silica sands.

 

NSAI estimate the net oil reserves, associated marketable sand volumes, and
future net revenue in respect of the gross (100 per cent.) interest in the
TSHII properties, as of 31 December 2021, in accordance with PRMS to be:

 

                                                     Net Volumes((1))      Future Net Revenue (US$ millions)
                                    Oil Reserves     Marketable Sand((2))                                     Present Worth
 Category                           (Thousand bbls)  (Thousand tonnes)     Total                              (US$ millions) at 10% discount rate
 Proved (1P)                        22,848.3         22,791.2              942.535                            304.800
 Proved + Probable (2P)             33,636.3         41,221.3              1,733.509                          474.821
 Proved + Probable + Possible (3P)  44,322.3         59,790.8              2,533.867                          576.267

Notes:

((1)) There is no expected gas production in respect of the project.

((2)) Net marketable sand volumes are stated after a 5 per cent. deduction for
fines and losses.

 

Accordingly, the net oil reserves, associated marketable sand volumes and
future net revenue attributable to TomCo's current 10 per cent. interest in
the TSHII properties is as follows:

 

                                                            Net Volumes        Future Net Revenue (US$ millions)
                                           Oil Reserves     Marketable Sand                                       Present Worth
  Category                                 (Thousand bbls)  (Thousand tonnes)  Total                              (US$ millions) at 10% discount rate
 Proved (1P)                               2,284.83         2,279.12           94.2535                            30.4800
 Proved + Probable (2P)                    3,363.63         4,122.13           173.3509                           47.4821
 Proved + Probable + Possible (3P)         4,432.23         5,979.08           253.3867                           57.6267

 

In accordance with the 2018 PRMS definitions and guidelines, one of the
primary requirements for oil and gas volumes to be classified as reserves is
that they be commercially recoverable. For the purposes of its Report, NSAI
evaluated a sensitivity to the project wherein costs are incurred to dispose
of 100 per cent. of the mined sand volumes rather than including revenue from
selling 95 per cent. of it. In this sensitivity, based on the oil prices and
costs assumed (as described further below), the project is still commercial at
the 1P, 2P and 3P levels.

 

Reserves categorisation conveys the relative degree of certainty; reserves
subcategorisation is based on development and production status. The 1P
volumes are inclusive of proved undeveloped volumes only. The Report indicates
that as of 31 December 2021, there are no developed oil reserves or associated
marketable sand volumes for the TSHII site.  For the purposes of the Report,
the volumes and parameters associated with the proved, proved plus probable,
and proved plus probable plus possible estimate scenarios of reserves are
referred to as 1P, 2P and 3P, respectively. The estimates of oil reserves,
associated marketable sand volumes, and future net revenue included have not
been adjusted for risk.  The Report does not include any value that could be
attributed to interests in undeveloped acreage beyond those tracts for which
undeveloped oil reserves and associated marketable sand volumes have been
estimated.

 

Gross revenue in the Report is the gross (100 per cent.) revenue from the
properties prior to any deductions whereas future net revenue is after
deductions of production taxes, capital costs, abandonment costs and operating
expenses, but before consideration of any income taxes. The future net revenue
has then been discounted at an annual rate of 10 per cent. to determine its
present worth.

 

The Report was prepared using oil and marketable sand price parameters
specified by TomCo. The future oil produced and processed through mining
operations is assumed to yield three distinct products including asphalt,
heavy oil, and diesel. The asphalt price is based on the Argus Asphalt Index
price of US$93.64. Heavy oil and diesel prices are based on the 1 December
2021, West Texas Intermediate posted price of US$62.05 and are adjusted for
quality and market differentials. Sand produced through mining operations is
assumed to be processed and sold as four distinct products (industrial,
construction, frac and silica sands). Sand prices are based on the 2019 United
States Geological Survey prices for each product.

 

Operating costs used in the Report are based on the projected costs of
upscaling pilot mining operations provided by TomCo. These costs include
TomCo's estimates of its administrative costs. Capital costs used in the
Report were also provided by TomCo and are based on the projected costs of
upscaling pilot mining operations. Capital costs were included for the planned
construction of a processing plant, production facilities and equipment. Based
on its understanding of the Company's future development plans and review of
the information provided by TomCo, NSAI regarded the estimated capital costs
to be reasonable. Abandonment costs used in the Report are TomCo's estimates
of the costs to abandon the future production facilities, net of any salvage
value. None of the costs were escalated for inflation. Greenfield is engaged
in ongoing discussions regarding funding options to potentially achieve the
ultimate acquisition of 100% of the Membership Interests, whilst progressing
other preparatory work. However, there can be no certainty that Greenfield can
secure the requisite funding for such acquisition.

 

The full report will shortly be available on the Company's website.

 

Enquiries:

 

TomCo Energy plc

Malcolm Groat (Chairman) / John Potter (CEO)
  +44 (0)20 3823 3635

 

Strand Hanson Limited (Nominated Adviser)

James Harris / Matthew Chandler
                  +44 (0)20 7409 3494

 

Novum Securities Limited (Broker)

Jon Belliss / Colin Rowbury
                          +44 (0)20 7399 9402

 

IFC Advisory Limited (Financial PR)

Tim Metcalfe / Florence Chandler
                  +44 (0)20 3934 6630

 

For further information, please visit www.tomcoenergy.com
(http://www.tomcoenergy.com/) .

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under 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.

 

Competent Persons' Statement

The information contained in this announcement that relates to Reserves in the
Duchesne River and Rimrock Sandstones in certain mining properties located in
the Uinta Basin, Utah, United States is based on information compiled by Mr.
Joseph M. Wolfe (Petroleum Engineer) and Mr. John G. Hattner (Petroleum
Geologist), both employees of Netherland, Sewell & Associates, Inc. Mr.
Wolfe and Mr. Hattner are both Qualified Petroleum Reserves and Resources
Evaluators and are both members of the Society of Petroleum Engineers and are
suitably qualified as Competent Persons as set out in the June 2009 AIM Note
for Mining and Oil & Gas Companies. Mr. Hattner is also a member of the
American Association of Petroleum Geologists. Mr. Wolfe and Mr. Hattner have
reviewed and have consented to the inclusion of such information in this
report in the form and context in which it appears.

 

 

Glossary of Technical Terms

 1P                 Proved Reserves
 2P                 Proved Reserves plus Probable Reserves
 3P                 Proved Reserves plus Probable Reserves plus Possible Reserves
 bbls               barrels of oil
 Probable Reserves  Those additional Reserves that analysis of geoscience and engineering data
                    indicates are less likely to be recovered than  Proved Reserves but more
                    certain to be recovered than Possible Reserves
 Proved Reserves    Those quantities of petroleum that, by analysis of geoscience  and
                    engineering data, can be estimated with reasonable certainty to be
                    commercially recoverable from a given date forward from known reservoirs and
                    under defined economic conditions, operating methods  and government
                    regulations
 Possible Reserves  Those additional reserves that analysis of geoscience and engineering data
                    indicates are less likely to be recoverable than       Probable Reserves
 Reserves           Reserves are those quantities of petroleum anticipated to be commercially
                    recoverable by application of development projects to known accumulations from
                    a given date forward under defined conditions

 

 

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