TIDM3LEG
RNS Number : 8996T
3Legs Resources plc
26 November 2013
For Immediate Release
26 November 2013
3Legs Resources plc
Corporate update
3Legs Resources plc ("3Legs" or the "Company"), an independent
oil and gas group focusing on the exploration and development of
unconventional oil and gas resources, announces the following
corporate update.
Highlights:
-- Data gathered from vertical wells to date have enabled a
detailed understanding of well stimulation effectiveness and of
reservoir properties in the Company's target shale horizons. The
Company has agreed with ConocoPhillips that the optimal route to
assessing flow rate potential in these horizons will now be to
drill, stimulate and test a long lateral well in the Sasino shale
horizon.
-- A three-well 2013/14 programme designed to achieve this
objective has been agreed with ConocoPhillips, commencing in Q4
2013 with two vertical pilot wells, to be drilled in our
high-graded area in order further to delineate the extent of the
Sasino and Piasnica horizons and determine the optimum placement
for the planned lateral well.
-- The 2013/14 programme will culminate in a long lateral well
most likely to be drilled in the Sasino formation by way of
side-track from one of the two planned vertical wells, completed
with a multi-stage stimulation and tested, over the period Q2/Q3
2014.
-- The significant learnings to date, together with the results
of the vertical test in the Sasino horizon in the Strzeszewo LE-1
vertical well due to be executed in December 2013, will help
calibrate completion designs for the long lateral well planned for
2014.
-- The cost of the committed work programme is estimated at
approx. US$63 million gross (approx. US$19 million net to the
Company); we currently anticipate a cash position of approx. GBP17
million at end Q3 2014, based on the budget agreed with
ConocoPhillips.
-- The planned programme further progresses the Board's strategy
to maximise the potential of the Baltic Basin concessions whilst
prudently managing the Company's cash balances.
Kamlesh Parmar, Chief Executive of 3Legs Resources,said:
"We are delighted to continue our collaboration with
ConocoPhillips through agreement on our 2013/2014 programme,
designed to deliver a flow rate with commercial potential from our
next lateral well. The programme is consistent with our strategy to
focus the Group clearly on our western Baltic Basin concessions,
while reducing our commitments elsewhere, and we believe is the
right way to unlock value quickly and efficiently for our
shareholders. We remain firm believers in the potential for a
successful shale gas project in Poland and in the prospectivity of
our acreage."
Larry Archibald, Senior VP Exploration at ConocoPhillips,
commented:
"From our technical analysis of the results to date, and drawing
on our experience of a number of North American shale plays,
ConocoPhillips believes that, through our holding in Lane Energy
Poland, we hold some of the best acreage in the Polish Baltic
Basin. We have proven that these shales are capable of sustained
gas flow. Through our planned exploration programme we have the
opportunity to more thoroughly assess the potential commerciality
of this prospective acreage."
Corporate update
Maintaining focus on Baltic Basin
As previously announced, 3Legs has been in discussions with
ConocoPhillips regarding the 2014 exploration programme. These
discussions have now concluded, and 3Legs and ConocoPhillips have
committed to a new 2013/14 work programme.
We continue to maintain our focus on our three western Baltic
Basin concessions, which we believe represent some of the most
prospective shale acreage in onshore Poland. Having considered the
results from the stimulation and test of the Piasnica (or Cambrian
Alum) shale in the Strzeszewo LE-1 well, together with the results
from previous wells, we have concluded that while the testing of
our target zones in a vertical well can yield valuable data
regarding the formation properties and its responsiveness to a
stimulation, it is unlikely to provide sufficient flow rate data to
enable flow rates from a long lateral section to be reliably
projected.
We have therefore agreed with ConocoPhillips to include in the
current drilling programme a long-length lateral well, to be
stimulated with a multi-stage treatment and then tested for up to
90 days. Our primary target remains the Sasino (or Ordovician O3)
horizon, while the Piasnica horizon remains an important secondary
objective.
2013/14 well programme
The first stage of the 2013/14 well programme will comprise the
drilling of two new vertical wells in order to improve our
understanding of our two target formations in our high-graded area,
including depth, thickness and shale reservoir properties, and
hence to determine the optimum placement of the planned lateral
section. Planning for the drilling of the first vertical well,
Lublewo LEP-1, is well advanced and drilling is expected to
commence in December 2013, to be followed by the second vertical
well, S awoszyno LEP-1, in the first quarter of 2014.
In addition, a single stage stimulation and test of the Sasino
horizon is due to be carried out in the Strzeszewo LE-1 vertical
well during December 2013. This stimulation will comprise a
cross-linked gel fluid in order to optimise concentrations of
proppant delivered into the formation, and will assist in the
calibration of the completion design for the planned long lateral
well in 2014.
A decision on the location of the planned lateral well will be
taken following the drilling of both vertical wells. The well is
planned to be drilled by way of a sidetrack from one of the two new
vertical wells and is expected to involve a long lateral section of
up to 1600 metres, most likely in the Sasino shale. The well will
then be completed with a multi-stage stimulation, using a
cross-linked gel fluid, and put on test for up to 90 days. Our
design for the completion programme on this well comprises
approximately 20 stages, which represents a significant increase on
the 13 stage programme carried out on our Lebien LE-2H lateral well
in 2011.
A decision on the drilling, stimulation and testing of a second
long lateral well, most likely in the underlying Piasnica shale
horizon, will be taken following the receipt of results from the
test of the first lateral well. If we achieve positive results from
the tests of one or both lateral wells, we will then consider with
ConocoPhillips whether to proceed to design and implement a pilot
development programme. The 2013/14 well programme is designed both
to meet current licence commitments and to progress the exploration
of our target shales.
Learnings to be applied
An important factor in maximising productivity from our target
formations will be managing their sensitivity to water. Based on
our core analysis, we are continually improving the mud programme
and the choice of stimulation fluids.
Our completion designs are now based on a cross-linked gel,
rather than a slick-water fluid as was used on the initial
stimulation of the Lebien LE-2H lateral well in 2011. Using a
cross-linked gel will effectively stimulate the target horizon
while reducing the amount of water needed for each stage and
optimising the amount of proppant delivered into the target
formation.
Ongoing core analysis and testing from our wells is helping us
to prepare for and manage other rock sensitivities with a view to
optimising completion design. Test data have indicated that an
optimum strategy for improving formation productivity is to
stimulate a larger number of smaller fractures, but using high
volumes of proppant in each case (i.e. significantly higher than
those used in our Lebien LE-2H lateral well). We have also
concluded that the most suitable proppant for the main part of the
stimulation programme is a 30/50 mesh high quality white sand as
opposed to, for example, a ceramic or resin-coated proppant.
The stimulation of the Sasino horizon in our vertical Strzeszewo
LE-1 well, due to be carried out during December 2013, will help us
to test and refine our preferred design before its implementation
in the planned lateral well next year. We expect our refined
completion design, to be applied to the planned lateral well in
2014, to yield a significant improvement in flow rates as compared
with flow rates achieved to date.
Geology and focus on high-graded area
Ongoing core analysis confirms our geological interpretation to
date, which shows our high-graded area for the Sasino and Piasnica
zones extending across the northern part of our western Baltic
Basin concessions. The Sasino formation is estimated to have over
25 metres of thickness across our high-graded area, while the
Piasnica formation is estimated to have over 15 metres of thickness
across our high-graded area. The two planned vertical wells will
help further delineate our high-graded area for both target
horizons, and thus help optimise the placement of the planned
lateral well.
Ministry approval has now been received for the acquisition of
67 km of 2D seismic data on our Lebork concession. This seismic
programme is due to be commenced imminently and, together with the
two new vertical wells to be drilled, will assist in the design and
implementation of a pilot development programme, if a decision is
made to proceed with this.
Balance sheet impact
The cost of the work programme which we have committed to is
expected to be approximately US$63 million gross (approximately
US$19 million net to 3Legs). Accordingly, we currently anticipate
that following implementation of the programme outlined above and
based on the budget we have agreed with ConocoPhillips, we will
have cash reserves of approximately GBP17 million at the end of the
third quarter of 2014.
While we are committed to the programme outlined above, we will
not commit to any further expenditure on our western Baltic Basin
concessions in the absence of positive initial results from the
planned lateral well. If such positive initial results do not
materialise, we will consider all options at that stage including
discussing with ConocoPhillips alternative options for the further
exploration and appraisal of the western Baltic Basin concessions,
which may include reviewing our continued participation in these
concessions. In addition, 3Legs has agreed to a one-time right to
cease its participation in these concessions at the point that
3Legs' expenditure on this work programme reaches US$19 million on
or before 31 December 2014.
For further information contact:
3Legs Resources plc Tel: +44 1624 811 611
Kamlesh Parmar, Chief Executive
Officer
Alexander Fraser, Chief Financial
Officer
Jefferies Hoare Govett Tel: +44 207 029 8000
Simon Hardy
Graham Hertrich
Northland Capital Partners Tel: +44 207 796 8800
Louis Castro
Matthew Johnson
FTI Consulting Tel: +44 207 831 3113
Oliver Winters
Shannon Brushe
Notes to Editors
3Legs Resources plc is an independent oil and gas group focused
on the exploration and development of unconventional oil and gas
resources. 3Legs Resources holds interests in six licences covering
approximately 1,084,000 acres (gross) in the onshore Baltic Basin
in northern Poland, a region considered to be one of the most
promising shale basins in Europe. Its activities are focused
primarily on the exploration and appraisal of its three western
Baltic Basin licences.
The technical information and opinions contained in this
announcement have been reviewed by Christie Ward Schultz (BSc in
Petroleum Engineering, Texas Tech University), Engineering Manager
of 3Legs Resources plc, who has over 14 years of experience in the
oil exploration and production industry. She has consented to the
inclusion herein of such technical information and opinions.
www.3legsresources.com
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR"
PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This news release contains forward-looking statements.
Forward-looking statements relate to future events and anticipated
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be no assurance that such expectation or belief will result or be
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and gas reserves or production; operating hazards, drilling risks,
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