TIDMHNR
RNS Number : 0875P
Highlands Natural Resources PLC
29 August 2017
29 August 2017
Highlands Natural Resources plc ('Highlands' or 'the
Company')
Placing to Raise GBP1.56 million
Highlands, the London-listed natural resources company, is
pleased to announce a placing of 7,818,000 new ordinary shares at
20 pence per share to raise GBP1,563,600 (the "Placing") gross. The
net proceeds from the Placing will enable the Company to enlarge
its current operations at its East Denver Niobrara shale oil and
gas project in Colorado (the "East Denver Project"), where drilling
is currently underway, to include the completion of two extended
lateral wellbores in the Niobrara formation.
Highlands' Chairman and CEO Robert Price said, "Today's
over-subscribed Placing enables Highlands to execute an exciting
operations programme at East Denver with larger scale and
significantly enhanced efficiency. The two-well approach to
drilling and hydraulic fracturing minimizes equipment down-time and
equipment mobilizations, thereby achieving important savings in
both costs and time. The Company also hopes to benefit from
additional production data as a two-well completion plan is
intended to achieve production from both the Niobrara B and
Niobrara C formations, which better enables our forward planning of
additional development. Most important, today's Placing in
combination with the two major third party funding commitments
secured since July have put Highlands on a path to potentially
achieve significant oil and gas production in the near term, which
I view as being transformational for Highlands and our
shareholders."
Background
As announced on 6 July 2017 and set out in its prospectus
published on that date, Highlands had raised sufficient funds to
drill and complete one well at its East Denver Project. However,
with the benefit of the additional proceeds from the Open Offer
concluded on 31 July 2017, the Company subsequently upgraded these
plans on 11 August 2017 to drill two wells (the Powell and
Wildhorse wells) and complete one well. This upgraded approach of
sequentially drilling two wells offered significant advantages
including added geologic data and operational efficiency.
On 23 August 2017, Highlands announced a participation agreement
(the "Participation Agreement") with one of the world's leading
oilfield services companies. Pursuant to the Participation
Agreement, the oilfield services company has agreed to fund a
portion of drilling and completions costs for a minimum of four
wells and up to 24 wells at the East Denver Project. This
represents a significant development for Highlands and an important
third-party validation of the East Denver Project. Furthermore, it
also enables Highlands, with only a relatively small amount of
supplemental funding, to drill and complete two wells at this stage
as illustrated below.
Summary of the East Denver Project
Highlands has access to 3,840 acres in Arapahoe County, Colorado
through leases and farm-out agreements secured in 2016, which
enable Highlands to drill as many wells as possible by the end of
2018 in acreage highly prospective for the Niobrara shale
formation. On this basis, and subject to typical permitting,
spacing, unitization, and approval processes in Colorado, the
directors believe that up to 24 wells can be drilled in the East
Denver Project.
A key attraction of the East Denver Project is that it has the
potential for a rapid production profile and repayment term. Based
on the comparable data referred to in the RPS competent person's
report dated 6 January 2017 (the "RPS CPR") and published in
Highlands' prospectus of 6 July 2017, Highlands expects to earn
significant revenues within two months of drilling and completion
of each well.
The East Denver Project targets the proven Niobrara shale oil
and gas reservoir:
-- Successful horizontal wells are producing within two miles of Powell and Wildhorse
-- Average daily production in 1(st) month of 992 Barrels of Oil
Equivalent per well (mean statistical case from RPS CPR)
-- Gross 1P Proved Reserves of 424,167 Barrels Of Oil Equivalent
Per Well (most conservative case from RPS CPR dated 6 January
2017)
-- Gross 2P Proved plus Probable Reserves of 539,667 Barrels of
Oil Equivalent Per Well (mean statistical case from RPS CPR)
-- Wells offer potential rapid cash flow, with average
anticipated payout period of 15-17 months (RPS CPR)
Drilling costs at the East Denver Project
In order to expand its operation to a two-well completion plan
and implement the simultaneous hydraulic fracturing of two wells,
the Company requires approximately US$700,000 in additional
capital, as outlined below.
(US$ Millions)
One Well Two Wells
Drilling costs $1.7 $3.2
Completion costs $3.0 $5.6
Surface facilities $0.3 $0.5
Costs incurred prior to 6 July
2017 $0.4 $0.4
----------------------------------- --------- ----------
Total Cost $5.3 $9.7
Third Party Investors' cost share
(48.75%) ($2.6) ($4.7)
Plus 10% contingency reserve $0.5 $1.0
----------------------------------- --------- ----------
Highlands' Cost Share $3.2 $5.9
Rebate from Third Party Investors
for pre-drilling expenses and
land ($0.2) ($0.4)
Less costs incurred prior to 6
July 2017 ($0.4) ($0.4)
----------------------------------- --------- ----------
Highlands' Net Cost $2.6 $5.1
Highlands Proceeds from 6 July
Placing, Subscription and Open
Offer $4.2 $4.2
Less costs of the prospectus and
fundraising process ($0.6) ($0.6)
Up-Front land reimbursements from
Third Party Investors $0.8 $0.8
----------------------------------- --------- ----------
Remaining Capital Requirement ($0.7)
The simultaneous approach to drilling and completions achieves
significant economic efficiencies summing to approximately
US$900,000 across the two-well operation (compared with the cost of
two wells drilled and completed separately). Key operational
advantages include simplified equipment logistics, greater ability
to timely secure key services, operational time savings, greater
equipment utilization, and streamlined surface operations.
The Directors believe that the two-well approach would also
accelerate revenues by potentially doubling the volumes of oil and
gas produced at the outset, and thus the associated revenues. The
average expected initial production rate for Highlands' wells in
the first month is 992 barrels of oil equivalent per day per well
(749 barrels of oil and 1,461 mcf of natural gas per day, based on
the RPS CPR Report). As such, by completing two wells at the outset
the Directors believe that the Company is potentially able to
quickly accelerate the arrival of significant hydrocarbon
production volumes and revenues, which would be a major step
towards long-term profitability.
Use of Proceeds
The net Placing proceeds will be initially applied to complete
the WIldhorse and Powell wells and thereafter will be used to
further invest in and advance the development of the East Denver
Project and for general corporate purposes.
Outlook
Highlands announced on 18 August 2017 that it has successfully
drilled and set surface casing in both the Wildhorse 5-64
15-16-1BHZ ("Wildhorse") and Powell 5-64 15-16-1CHZ ("Powell")
wells. Completion of surface casing represents an important
operational milestone. Drilling operations for the Powell well are
expected to continue for approximately two weeks from the date that
surface casing was set with a targeted Total Depth ("TD"),
representing the total vertical and horizontal distance drilled in
the well, of 18,247 ft. The Company will provide further
operational updates to the market after TD is reached on the Powell
well. Upon completing the Powell well, the rig will walk back to
the Wildhorse well to continue drilling the remainder of the
Wildhorse's lateral wellbore over a period of approximately two
weeks.
Following drilling operations, the Company will commence
completion operations (also called hydraulic fracturing or
"fracking"), which will last several weeks from the time of
commencement. Following the completions phase, the Company will
begin the flow-back process and production process, resulting in
definitive oil and gas production results, which the Company will
release to the market.
Admission and dealings
Application will be made to the London Stock Exchange for the
new ordinary shares issued pursuant to the Placing (the "New
Ordinary Shares") to be admitted to trading on the Official List of
the UK Listing Authority by way of a Standard Listing and to
trading on the London Stock Exchange's Main Market for listed
securities. It is expected that such admission will occur at 8.00
a.m. on 5 September, 2017.
Following admission, the New Ordinary Shares will rank pari
passu in all respects with the existing ordinary shares of 5 pence
each in issue including the right to receive all dividends and
other distributions declared and the total number of ordinary
shares in Highlands with voting rights will be 104,523,084. This
figure may be used by Highlands shareholders as the denominator for
calculations to determine if they have a notifiable interest in
Highlands under the Disclosure and Transparency Rules, or if such
interest has changed.
Following the issue of the above New Ordinary Shares, although
the holding of Robert Price, Executive Chairman of Highlands, has
not changed, with effect from Admission his existing holding of
12,000,000 ordinary shares now represents 11.48 per cent. of the
Company's total voting rights.
THIS RELEASE CONTAINS INSIDE INFORMATION.
**ENDS**
For further information, please visit www.highlandsnr.com, or
contact:
Highlands Natural +1 (0) 303 322
Robert Price Resources plc 1066
+44 (0) 207 464
Brinsley Holman Keith Bayley Rogers 4098
Cenkos Securities +44 (0) 131 220
Nick Tulloch plc 9772
+44 (0) 131 220
9771 /
Cenkos Securities +44 (0) 207 397
Neil McDonald plc 1953
St Brides Partners +44 (0) 20 7236
Lottie Brocklehurst Ltd 1177
St Brides Partners +44 (0) 20 7236
Hugo de Salis Ltd 1177
Notes to Editors
Highlands (LSE: HNR.L) is a London-listed natural resources
company with a portfolio of high-potential oil, gas and helium
assets and technologies. The company's core projects include:
-- East Denver Niobrara: a farm-in opportunity for horizontal
oil and gas wells targeting the Niobrara shale formation in a
well-studied area of the Denver Julesburg Basin.
-- DT Ultravert: a re-fracking and parent well protection
technology with one patent granted and additional patents pending
in the United States and internationally. Highlands is advancing
commercial conversations with a range of oil and gas operators to
create revenue-sharing opportunities for DT Ultravert
applications.
-- Helios Two: a 105,000+ acre helium and natural gas prospect
in SE Montana with drilling and assessment operations ongoing.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IOEPPMITMBBTBLR
(END) Dow Jones Newswires
August 29, 2017 02:01 ET (06:01 GMT)
Chill Brands (LSE:CHLL)
Historical Stock Chart
From Apr 2024 to May 2024
Chill Brands (LSE:CHLL)
Historical Stock Chart
From May 2023 to May 2024