TIDM3LEG
RNS Number : 9315R
3Legs Resources plc
17 September 2014
For Immediate Release
17 September 2014
3Legs Resources plc
Operations and 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 in Poland, announces the
following operations update.
Highlights:
Baltic Basin: Lublewo LEP-1ST1H lateral well
-- The well continues to flow natural gas and light oil in
addition to frac fluid; a nitrogen lift was commenced on 20
August.
-- Over the period from 8 August to 17 September, the well has
produced at an average rate of 396 mscf/d natural gas and 157 b/d
of light oil.
-- The well is also continuing to flow back frac fluid and as at
17 September some 26.0% of the total amount of frac fluid
originally injected had been recovered.
-- The well is producing higher amounts of oil than anticipated,
whereas natural gas production is lower than had been hoped.
-- On the basis of the information presently available to it and
reviewed with Netherland, Sewell & Associates, the Company does
not feel confident that the flow rates from this well are likely to
improve to a level that it would consider commercially viable.
Corporate update
-- The Company has a one-time option to cease participation in
activity on its three western Baltic Basin concessions once its net
share of expenditure reaches US$19 million; this limit has now been
reached.
-- The Company has concluded that it would be in the best
interests of its shareholders to exercise this option, thereby
capping its financial liability in relation to the three
concessions; it has now exercised this option.
-- 3Legs estimates that it will have cash resources of
approximately GBP17 million as at the end of September; it is
actively considering its options to maximise cash returns to
shareholders in the most efficient, timely and cost-effective
manner.
-- A further announcement will be made on 30 September, when the
Company's interim results will also be published.
Lublewo LEP-1ST1H well
The Lublewo LEP-1ST1H lateral well is the third and last well in
the Company's 2013/14 drilling programme. It is also the third
lateral well, and the eighth well in all, to be drilled by 3Legs
and ConocoPhillips in Poland's Baltic Basin to date. Located in the
Company's high-graded area in the northern part of its three
western Baltic Basin concessions, the well was designed to target
the Sasino shale formation in an area where it was believed to be
most prospective by reason of its thickness, depth and reservoir
rock properties. The Company was pleased to report in earlier
announcements that the well had been successfully drilled with a
1500 metre lateral section and stimulated with a 25-stage hydraulic
fracture stimulation, all executed according to plan. The hydraulic
fracture stimulation itself delivered some 7.7 million pounds of
high-grade white sand proppant into the target shale formation.
This compares with the last lateral well stimulation executed by
the Company in the Sasino formation, when some 2.9 million pounds
of proppant were delivered through a 1000 metre lateral section in
the Lebien LE-2H well in 2011.
Following commencement of the long term test of the Lublewo
LEP-1ST1H lateral well on 6 August, the well has continued to flow
back frac fluid and hydrocarbons, comprising both natural gas and
light oil. It subsequently became necessary to implement a nitrogen
lift, and this was commenced on 20 August.
On 6 September the well was again temporarily suspended, this
time so that the down-hole pressure gauges could be removed, to
enable the bottom hole pressures to be read and actual well
performance to be better evaluated. Following removal of the
down-hole pressure gauges, the well continued to flow hydrocarbons
and frac fluid with the aid of the nitrogen lift.
As at 17 September, the well was producing 512 mscf/d of natural
gas and 115 b/d of light oil, and some 26.0% of the total amount of
frac fluid originally injected had been recovered. Over the period
from 8 August to 17 September, excluding some down time, the well
has produced at an average rate of 396 mscf/d natural gas and 157
b/d of light oil.
The Company engaged the services of Netherland Sewell &
Associates ('NSAI') to assist in reviewing the production and
pressure data and to model likely well performance outcomes. NSAI
also performed extensive analysis on core, log and production data
taken from other wells drilled by the Company and ConocoPhillips on
their western Baltic Basin concessions, to assist in modelling the
likely future performance of the Lublewo LEP1-ST1H well.
In general, the well is producing higher amounts of oil than
anticipated, whereas natural gas production is lower than had been
hoped. While it had been hoped that early hydrocarbon production
rates might improve substantially as the well continued to flow
back frac fluid, this has not yet occurred.
With the assistance of NSAI, the Company has carefully analysed
the daily production data accumulated to date and has reviewed the
pressure data retrieved from the down-hole gauges, in order to
model potential outcomes. It is likely to take several more months
to complete the current testing programme, including a pressure
build-up test after the completion of the current flow-testing
phase. Nevertheless, on the basis of the information presently
available to it and reviewed with NSAI, the Company does not feel
confident that the flow rates from this well are likely to improve
to a level which it would consider commercially viable.
The Company considers that the lateral well was successfully
drilled and stimulated, in all material respects, in such a way as
to maximise the production potential of the Sasino horizon at the
Lublewo location, which is itself situated within the Company's
high-graded area. Consequently the Company does not believe, based
on current information, that a significantly better result could be
achieved from testing the Sasino formation in a different part of
its western Baltic Basin concessions. Moreover, to the Company's
knowledge, there is no other activity being conducted or planned by
other companies operating in the Basin that is likely to yield
significant additional data in the coming months.
Corporate update
Under the agreement reached with ConocoPhillips in connection
with the 2013/14 drilling programme, 3Legs has a one-time option to
cease participation in activity on its three western Baltic Basin
concessions once its net share of expenditure reaches a limit of
US$19 million, on or before 31 December 2014. This limit has now
been reached.
The advantage to 3Legs of exercising this option is that it
would be discharged from liability to participate in expenditure on
future activities on the three concessions, including both the cost
of the remainder of the 2013/14 work programme over the $19 million
limit, and the cost of end-of-life decommissioning of six existing
wells drilled on the concessions by the Company and
ConocoPhillips.
In view of the results to date of the Lublewo LEP1-ST1H well,
which it considers to be at sub-commercial levels, and the further
time needed to complete the remainder of the testing phase on the
well when the prospects of a more successful outcome appear remote,
the Company has concluded that it would be in the best interests of
its shareholders to exercise its option to withdraw from the three
western Baltic Basin concessions, thereby capping its financial
liability in relation to these operations. This decision is also
consistent with statements made to shareholders at the time when
the 2013/14 programme was announced.
The Company has therefore today exercised its option to
withdraw. Its equity interest in the three concessions will in due
course be transferred to ConocoPhillips for no consideration, in
accordance with the terms of the option arrangement.
3Legs estimates that it will have cash resources of
approximately GBP17 million as at the end of September 2014. The
Company is not currently conducting any other operations elsewhere
and, moreover, has committed to its shareholders not to pursue
other activities outside Poland. It is therefore actively
considering its options to maximise cash returns to shareholders in
the most efficient, timely and cost-effective manner. Further
information will be provided in the Company's interim financial
results, which are now scheduled for release on 30 September.
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: +44 207 382 1100
Matthew Johnson
FTI Consulting Tel: +44 203 727 1000
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. Following the transfer of its interest in its three
western Baltic Basin concessions to ConocoPhillips, 3Legs Resources
holds three concessions covering approximately 500,000 acres (gross
and net) in the eastern part of the onshore Baltic Basin in
northern Poland.
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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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