TIDM3LEG
RNS Number : 6411Z
3Legs Resources plc
20 March 2012
For Immediate Release
20 March 2012
3Legs Resources plc
Corporate update
3Legs Resources plc (the "Company"), an independent oil and gas
group focusing on the exploration and development of unconventional
oil and gas, announces the following operational update.
Key points
Baltic Basin concessions
-- ConocoPhillips, with whom the Company has conducted joint
evaluation activities on its Baltic Basin concessions, has given
notice of exercise of its call option over the Company's three
western Baltic Basin concessions, thereby acquiring a 70% equity
interest in and operatorship of these concessions
-- The 2011 exploration programme has enabled the Company to
refine its modelling of likely variations in quality and thickness
of the shales
-- The 2012 exploration programme includes a vertical well on
one of the three western concessions in the second half of 2012,
with the option to drill a horizontal section later; further
testing on one or both of the two existing horizontal wells, Lebien
LE-2H and Warblino LE-1H, is still under consideration
-- Plans for the Company's three eastern Baltic Basin
concessions are still under consideration
-- The three eastern Baltic Basin concessions are to be divested
into a new legal entity to be retained by the Company under the
same terms as the existing Joint Evaluation Agreement;
ConocoPhillips will retain the option to acquire a 70% interest in
the three eastern concessions, exercisable at any time up until 30
September 2012
Southern Poland concessions
-- Seismic acquisition on the Company's southern Poland
concessions is now complete; data has been processed and is
currently undergoing interpretation
Forward strategy
-- The Company continues to consider other unconventional
resource opportunities; its preferred area of activity remains
Europe but other regions of the world will also be considered
Cash position
-- As at 29 February 2012, the Company had unaudited cash and
cash equivalents of GBP48.1 million.
Peter Clutterbuck, Chief Executive of 3Legs Resources, said:
"We are very pleased that ConocoPhillips has exercised its call
option in respect of our three western concessions in the Baltic
Basin. Our objective all along has been to see ConocoPhillips
exercise this option and this decision represents a very
satisfactory conclusion to almost three years of cooperation in the
exploration and appraisal of the Baltic Basin shales. During that
period 3Legs Resources as operator has drilled a total of four
wells in the Baltic Basin shale play and has safely and
successfully drilled, fracced and tested the first two horizontal
shale gas wells in Poland. We enjoy an excellent working
relationship with ConocoPhillips, which will now move into a new
phase as operatorship of the three western concessions passes to
ConocoPhillips.
We have developed with ConocoPhillips a basis for the separate
treatment of the western and eastern Baltic Basin concessions. This
will enable us, together with ConocoPhillips, to continue to
progress the exploration and appraisal of our three western
concessions. We have already demonstrated that these concessions
are more dry gas-prone and hence offer a more attractive risk
profile, confirming our original assessment of the basin.
Nevertheless, we continue to believe our three eastern concessions
also have potential and we will be finalising our plans for these
concessions over the coming months, following which a further
announcement will be made.
Our Baltic Basin work programme for 2012 is focused on further
defining the 'sweet spots' within our western concessions, building
on the conclusions learned from our 2011 drilling campaign. We will
be taking a measured approach to data gathering and will ensure
that we have assembled as full a data set as possible before
committing to drilling further horizontal sections. In this
context, data-sharing between operators will be of great importance
to the future progress of the Baltic Basin shale play, and we will
continue to promote this. We are committed to taking the Baltic
Basin programme forward from its current exploration phase and the
focus from now on will be to drill wells in areas most likely to
have the best potential to flow at commercial rates, while further
refining frac design."
Baltic Basin concessions
ConocoPhillips, with whom the Company has conducted joint
evaluation activities on its Baltic Basin concessions, has given
formal notice of exercise of its option to acquire a 70% interest
in the Company's three western Baltic Basin concessions, pursuant
to the Joint Evaluation Agreement and ancillary documents entered
into between the Company and ConocoPhillips in August 2009.
Completion of the option exercise must take place by no later than
September 2012, whereupon operatorship of the three western
concessions will pass to ConocoPhillips. ConocoPhillips has been
actively involved in operations to date and accordingly the Company
anticipates a smooth transfer of operatorship.
The Company will retain a net 30% interest in the three western
concessions, as a non-operator. The three western concessions cover
an area of approximately 2,049 sq km (506,000 acres) gross, or
approximately 615 sq km (152,000 acres) net to the Company.
The Company and ConocoPhillips are continuing to consider
options for the three eastern Baltic Basin concessions. Results to
date from the Company's wells and those of other operators in the
basin confirm that the eastern concessions are situated in a more
liquids-prone part of the basin, whereas the Company has always
prioritised the exploration of the more dry gas-prone parts of its
concessions, situated further to the west. As the potential for
production of liquids in the Baltic Basin becomes better
understood, the Company may increase its focus on the eastern
concessions, depending on the well results that are obtained.
In order to facilitate the development of a separate strategy
for the three eastern concessions, these concessions will be
divested into a separate Polish legal entity, which will be a
wholly-owned subsidiary of the Company and be subject to equivalent
contractual terms as are set out in the Joint Evaluation Agreement.
ConocoPhillips will retain an option to acquire a 70% interest in
the three eastern concessions, exercisable by giving six months'
notice at any time up until 30 September 2012. The three eastern
concessions cover an area of approximately 2,338 sq km (578,000
acres) gross.
Following the conclusion of its 2011 exploration programme, the
Company has been able to refine further its regional geological
model incorporating the results of its two horizontal wells Lebien
LE-2H and Warblino LE-1H, as well as data from wells drilled by
other operators in the basin which has been acquired through data
trades. While its target lower Palaeozoic shales are understood to
show considerable lateral continuity across the entire basin, the
additional data nevertheless reveals degrees of variability in
quality and thickness of the shales which enables a more detailed
understanding of the basin. The Company's updated interpretation
broadly validates its existing acreage selection and also enables
it to project with greater certainty areas within its concessions
where it may prioritise activity.
Based on its updated geological interpretation, the Company has
agreed with ConocoPhillips a plan for one vertical well to be
drilled on its Lebork concession, in the second half of 2012. This
well will be extensively evaluated and the parties will retain the
flexibility, if considered appropriate, to drill a horizontal
section to the well at a later date, which may be then be fracture
stimulated and tested. The Company and ConocoPhillips are giving
further consideration to options for additional testing of one or
both of its two existing horizontal wells Lebien LE-2H and Warblino
LE-1H, following the end of winter conditions.
The Company has concluded a number of data exchanges with other
operators in the basin, with a view to improving its understanding
of the basin geology in the most efficient manner possible. Further
exchanges are planned. Data being exchanged includes well logs and
core data and in the future is likely to include well completion
and frac design, together with test results. The Company firmly
believes that data sharing and other similar forms of cooperation
amongst operators will be of great benefit in enabling all parties
to advance their understanding of the Baltic Basin shales.
Southern Poland concessions
The campaign of 2D and 3D seismic acquisition has now been
completed by Acoustic Geophysical Services and this data has been
processed. Interpretation results are expected in early second
quarter 2012.
Forward strategy
The Company continues to consider adding other unconventional
resource opportunities to its portfolio, building on its proven
unconventional capabilities and leveraging its existing knowledge
of unconventional oil and gas exploration. Looking ahead, its focus
will include tight oil and gas exploration opportunities as well as
shale oil and shale gas, and while its preferred area of activity
remains Europe, the Company considers it also appropriate to
include other regions of the world where a company of its size and
profile is, in its view, able to operate safely and effectively.
The objective will be to build a portfolio optimised for entry
cost, risk, timing and upside.
Cash position
As at 29 February 2012, the Company had unaudited cash and cash
equivalents of GBP48.1 million.
For further information contact:
3Legs Resources plc Tel: +44 1624 811 611
Peter Clutterbuck, Chief
Executive Officer
Alexander Fraser, Chief
Financial Officer
Jefferies Hoare Govett Tel: +44 207 029 8000
Alex Grant
Simon Hardy
Jamie Buckland
College Hill Tel: +44 207 457 2020
Nick Elwes
Catherine Maitland
Notes to Editors
3Legs Resources was established in early 2007 to focus on the
exploration and development of unconventional oil and gas
resources, with a particular focus on shale gas in Europe. A first
mover in Poland, 3Legs Resources has acquired six licences covering
approximately 1,084,000 acres (gross) in the onshore Baltic Basin,
a region considered to be one of the most promising shale basins in
Europe. The Company's primary targets in the Baltic Basin are the
organic-rich black shales of the Lower Palaeozoic section. In
addition to these assets, the Company holds onshore exploration
licences over acreage near Krakow in southern Poland and in
Baden-Wurttemberg in south-west Germany.
The technical information and opinions contained in this
announcement have been reviewed by Peter Clutterbuck (MA Honours in
Engineering, Cambridge University and former Member of the Board of
the Society of Petroleum Engineers in London), Chief Executive
Officer of 3Legs Resources plc, who has over 35 years of experience
in the oil exploration and production industry. He has consented to
the inclusion herein of such technical information and
opinions.
www.3legsresources.com
This information is provided by RNS
The company news service from the London Stock Exchange
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