Independent Xenia Project Gas Reserve Report
August 10 2010 - 2:00AM
UK Regulatory
TIDMHAWK
RNS Number : 7992Q
Nighthawk Energy plc
10 August 2010
Nighthawk Energy plc
("Nighthawk" or the "Company")
Independent Xenia Project Gas Reserve Report
Green Valley Project Acquisition
Nighthawk, the US focused hydrocarbon development and production company (AIM:
HAWK and OTCQX: NHEGY), is pleased to announce the results of an independent gas
reserve evaluation of the Xenia project ("Xenia"), situated in Bourbon County,
Kansas, together with details of the Green Valley project acquisition.
Highlights
· Oilfield Production Consultants Limited ("OPC") gas reserve evaluation
calculates gross 3P reserves over 6,000 acres at 15.26 billion cubic feet (4.88
billion cubic feet net to Nighthawk)
· Xenia acreage increased to in excess of 15,000 acres subsequent to
evaluation
· Xenia average daily production 600,000 cubic feet of gas (gross) since
October 2009
· Eleven successful new wells drilled and currently being hooked up to
pipeline
· Acquisition of Green Valley project adds further 3,500 acres to Xenia
project in addition to the 15,000 acres currently held
Xenia Project Overview
Nighthawk holds a 50% interest in Xenia, located near the border of Kansas and
Missouri, with the operator, Running Foxes Petroleum Inc. ("Running Foxes"),
holding the remaining 50% interest. Xenia forms part of the larger Revere
project. Though an ongoing land acquisition programme, the acreage at Xenia has
expanded from the original 3,700 acres to approximately 15,000 acres.
The Xenia leases are located in the prolific shallow Cherokee Basin of
southeastern Kansas. The gas production is coal bed methane ("CBM") derived
from the Summit, Excello and Riverton coal formations in the carboniferous
Pennsylvanian at depths of less than 1,000 feet.
Currently there are eleven producing wells and an additional eleven recently
drilled wells which are undergoing completion and hook-up to the Xenia pipeline.
The cumulative gas production since the start of operations in late October
2009 is approximately 150 MMscf and average daily production is 600 Mscf of gas.
Following the addition of the eleven new wells, gas production is expected to
increase by a further 600 Mscf per day.
In November 2009, the 26 kilometre, 5 MMscf capacity Xenia gas pipeline was
completed and commissioned. This pipeline, which is 50% owned by Nighthawk, is
flowing Xenia gas into the Bourbon County pipeline, which is also 50% owned by
Nighthawk, and sold into the Southern Star (a division of General Electric)
interstate transport line.
Oilfield Production Consultants Reserve Evaluation
OPC, an independent international consultancy, was commissioned by Nighthawk, to
undertake an evaluation of the gas reserves at Xenia, as defined under the
Society of Petroleum Engineers Petroleum Resources Management System.
The scope of work superseded the original scope of work provided to OPC which
was to prepare a report on gas in place only. Due to better than expected
production from the Summit, Excello and Riverton zones, further drilling success
and the addition of new lease areas it was decided to proceed with a full
reserve report over the 6,000 acres held at that time. The leasehold area at
Xenia is currently approximately 15,000 acres, excluding the Green Valley
project acreage described below.
The OPC evaluation was performed based on the data from the eleven producing
wells and three wells awaiting completion and hook-up. During the OPC
evaluation a further 9,000 acres have been added to the land base and a further
eight wells await completion and hook-up. OPC state in their Executive Summary
that the additional acreage and wells will very likely increase the 2P and 3P
reserves for Xenia once this new data is incorporated in future reserve updates.
The OPC current reserve figures calculated for Xenia over the 6,000 acre area,
with the net reserves to the partnership taking account of a 20% royalty and
severance tax and assuming 20% shrinkage due to gas handling, transportation and
compression, are as follows:
+-----------------+----------------+--------------+---------------+
| Reserve |Gross Reserves |Net Reserves | Net to |
| Category | Mscf | Mscf | Nighthawk |
| | | to the | Mscf |
| | | partnership | |
+-----------------+----------------+--------------+---------------+
| Total Proved | 696,242 | 445,595 | 222,797 |
| Developed | | | |
+-----------------+----------------+--------------+---------------+
| Total Proved | 287,256 | 183,844 | 91,922 |
| Non-Producing | | | |
+-----------------+----------------+--------------+---------------+
| Proved | 555,715 | 355,657 | 177,829 |
| Undeveloped | | | |
+-----------------+----------------+--------------+---------------+
| 1P Reserves | 1,539,213 | 985,096 | 492,548 |
+-----------------+----------------+--------------+---------------+
| Probable behind | 1,428,294 | 914,108 | 457,054 |
| Pipe | | | |
+-----------------+----------------+--------------+---------------+
| Probable offset | 1,445,927 | 925,393 | 462,697 |
+-----------------+----------------+--------------+---------------+
| 2P Reserves | 4,413,433 | 2,824,597 | 1,412,229 |
+-----------------+----------------+--------------+---------------+
| Possible offset | 10,844,453 | 6,940,450 | 3,470,225 |
+-----------------+----------------+--------------+---------------+
| 3P Reserves | 15,257,886 | 9,765,047 | 4,882,524 |
+-----------------+----------------+--------------+---------------+
The key findings of the OPC evaluation over 6,000 acres at Xenia are as follow:
· Proved developed gas reserves were assigned for the current eleven
producing wells with production from the Summit, Excello and Riverton formations
using decline curve analysis for each well
· Proved non-producing reserves were assigned for three wells awaiting
completion (for which data was provided) using individual decline curves
· Proved undeveloped reserves were assigned to production from new wells
directly adjacent to the existing production wells. The proved reserves for
each of these new wells (with a spacing of 80 acres) based on the average CBM
parameters from the existing production wells was 111 Mscf
· Probable reserves were assigned for other zones in the existing wells
which were not completed, but are known to produce gas in the Cherokee Basin.
Using CBM parameters from existing producing wells and from the Kansas
Geological Survey database, it was estimated that for each well the probable
reserves in these other gas bearing zones were 127.9 Mscf
· Possible reserves were assigned to the remaining lease acreage within the
6,000 acres, approximately three miles from existing production wells. The
estimated reserves per well is 240.8 Mscf
· There is also an additional 3.16 Bscf gross of contingent resources for
acreage beyond the area assessed for possible reserves. Once more wells are
drilled in the vicinity of this acreage the contingent resources can be
converted to possible, probable and eventually proven reserves
· Currently, the majority of the reserves are in the probable or possible
category. As additional wells are drilled and placed on production, the
reserves at Xenia will move from probable and possible reserves to proved
reserves
The OPC evaluation compares favourably with a previous reserve evaluation,
undertaken in early 2010 on behalf of Running Foxes, conducted by Benavides
Petroleum Engineering Inc., a Denver based consultancy which calculated the
cumulative 3P reserves at Xenia over 6,000 acres to be 14.56 Bscf.
In addition to the OPC gas reserve report, in November 2009, OPC conducted a
review of STOOIP at Xenia over approximately 3,700 acres held at that time. The
P50 (most likely) calculation was reported to be 6.85 MMbbl. The P10 (low case)
and P90 (high case) figures were 1.49 MMbbl and 23.7 MMbbl gross respectively.
As development since that time has continued, and further land acquisition has
increased to approximately 15,000 acres, the board expects this figure to
increase significantly following further evaluation of the acreage.
Green Valley Acreage Acquisition
Nighthawk and Running Foxes have purchased 3,250 acres in Bourbon County, known
as the Green Valley project. This acreage will now form part of the Xenia
project.
The new project area has two shut in wells in place drilled by the previous
operator in 2008. During drilling the wells flowed in excess of 100 Mcf of gas
per day, however due to the lack of a pipeline the wells could not be monetised.
The acreage is adjacent to the recently commissioned Xenia pipeline and Running
Foxes plan to complete the well closest to the pipeline within the next 30 days
and place on production.
David Bramhill, Managing Director of Nighthawk, commented:
"The results and cash flow from Xenia are contributing significantly to the
overall economics and development of the combined Revere project. OPC has
completed an excellent report, confirming and increasing the figures provided by
the initial review undertaken by Running Foxes.
"An update on the remainder of the Revere project will be issued in the near
future. Revere, although regarded as secondary to Jolly Ranch, our cornerstone
project, is proving to be a valuable part of Nighthawk's portfolio."
Tim Heeley B.Eng (Hons) a member of the Society of Petroleum Engineers, Fellow
of the Geological Society of London and a Chartered Energy Engineer, who is
Commercial Director of Nighthawk and has over 14 years of experience in the
hydrocarbons industry, has approved the technical information contained in this
announcement.
For further information please contact:
+------------------------------+-----------------------------------------+
| Nighthawk Energy plc | |
| David Bramhill, Managing | 07787 160682 |
| Director | 07956 525433 |
| Tim Heeley, Commercial | 020 7887 1453 |
| Director | |
+------------------------------+-----------------------------------------+
| | |
+------------------------------+-----------------------------------------+
| Westhouse Securities Limited | 020 7601 6100 |
| Tim Feather | tim.feather@westhousesecurities.com |
| Matthew Johnson | matthew.johnson@westhousesecurities.com |
+------------------------------+-----------------------------------------+
| | |
+------------------------------+-----------------------------------------+
| Matrix Corporate Capital LLP | 020 3206 7000 |
| Louis Castro | louis.castro@matrixgroup.co.uk |
| James Pope | james.pope@matrixgroup.co.uk |
+------------------------------+-----------------------------------------+
| | |
+------------------------------+-----------------------------------------+
| Bishopsgate Communications | 020 7562 3395 |
| Limited | nick@bishopsgatecommunications.com |
| Nick Rome | |
+------------------------------+-----------------------------------------+
| | |
+------------------------------+-----------------------------------------+
| Financial Dynamics | 020 7831 3113 |
| Ben Brewerton | ben.brewerton@fd.com |
| Ed Westropp | edward.westropp@fd.com |
| | |
+------------------------------+-----------------------------------------+
Glossary
+--------------------+------------------------------------+
| "1P Reserves" or | Proven reserves, indicates at |
| "P90" | least a 90% probability that the |
| | quantity of oil in place will |
| | equal or exceed the estimate |
+--------------------+------------------------------------+
| "2P Reserves" or | Probable reserves, indicates at |
| "P50" | least a 50% probability that the |
| | quantity of oil in place will |
| | equal or exceed the estimate |
+--------------------+------------------------------------+
| "3P Reserves" or | Possible reserves, indicates at |
| "P10" | least a 10% probability that the |
| | quantity of oil in place will |
| | equal or exceed the estimate |
+--------------------+------------------------------------+
| "Bscf" | billions of standard cubic feet |
+--------------------+------------------------------------+
| "MMbbl" | millions of barrels |
+--------------------+------------------------------------+
| "MMscf" | millions of standard cubic feet |
+--------------------+------------------------------------+
| "Mscf" | thousands of standard cubic feet |
+--------------------+------------------------------------+
| "STOOIP" | Stock Tank Oil Originally In Place |
+--------------------+------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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