TIDMHAWK
RNS Number : 3114I
Nighthawk Energy plc
24 July 2012
NIGHTHAWK ENERGY PLC
("Nighthawk" or "the Company")
Operations Update
Nighthawk, the US focused shale oil development and production
company (AIM: HAWK and OTCQX: NHEGY), announces an update on its
75% owned, operated project at Jolly Ranch in the Denver-Julesburg
Basin, Colorado.
Highlights
-- Recovery in production underway
-- Average gross production in Q2 2012 increased by 25% over Q1 2012 to 42 bbls/day
-- Average gross production in first half of July 2012 of 57 bbls/day
-- Drilling permit applications submitted for 2 well locations
with a further 2 applications pending, with up to 21 additional
applications to follow
-- Drilling of new wells expected to commence in August
-- Work-over program completed on schedule
-- Claims against Running Foxes Petroleum ("RFP"), the former
operator of Jolly Ranch, are being formally pursued
-- Active lease management program underway
Production
There was a steady improvement in production during Q2 2012 and
into July as the Company continued to overhaul, refurbish and
replace poor quality and unreliable production equipment. Average
gross production in Q2 2012 was 42 bbls/day, up from 33 bbls/day in
Q1, with three wells contributing from mid-May onwards. Production
from additional wells, initially expected in mid-June, began to
flow in early July, contributing to gross average production of 57
bbls/day during the first half of the month.
Three further wells have been re-completed for production but
are presently on hold pending resolution of leasing issues with the
land-owners.
Gross Oil Production was as follows:-
Period Total Production Average Production
(bbls of Oil) (bbls oil/day)
Q3 2011 6,480 70
----------------- -------------------
Q4 2011 5,161 56
----------------- -------------------
H2 2011 11,641 63
----------------- -------------------
Q1 2012 3,036 33
----------------- -------------------
Q2 2012 3,789 42
----------------- -------------------
H1 2012 6,825 38
----------------- -------------------
(Prior to 23 January 2012 Nighthawk had 50% Working Interest/40%
Net Revenue Interest)
(Post 23 January 2012 Nighthawk has 75% Working Interest/60% Net
Revenue Interest)
New Drilling Program
Following extensive geo-science work, site surveys and
completion of surface use agreements, applications for permits to
drill two new wells have been submitted to the State with an
additional two pending. Additional applications for up to 21 new
wells will be submitted over the next few months. Drilling is
expected to commence in the second half of August and a drilling
rig is expected to be contracted shortly.
Work-Over Program
The existing well work-over program was completed as planned and
the work-over rig was released in mid-June. Of the fifteen wells
evaluated, eight are considered to be capable of near-term
production, one has been plugged and abandoned ("P&A"), another
is scheduled for P&A, and decisions on future plans for the
other five wells have been deferred pending results from the new
drilling program.
Since becoming operator, Nighthawk Production LLC, a 100% owned
subsidiary of Nighthawk, has conducted a rigorous assessment of the
leases, facilities, equipment, and infrastructure at Jolly Ranch
and the level of compliance with US Federal, State and industry
best management practices. This review has identified a range of
issues which Nighthawk believes will require remedial action, all
of which originate from the period of time prior to Nighthawk
Production LLC becoming operator.
The review also identified inconsistencies in past costs charged
by RFP to Nighthawk Production LLC as a non-operating partner. As a
result, the Company has formally invoked its right to audit RFP
under the terms of the Joint Operating Agreement ("JOA"), initially
focusing on the previous two full years' billing.
The Company has also lodged claims and invoices with RFP under
the terms of the JOA and the Purchase and Sale Agreement dated 23
December 2011 in respect of title defects, equipment problems,
remedial infrastructure work and refunds of previous payments.
Additional claims against RFP as a result of the audit, and in
respect of electrical and environmental remediation work, are
likely. In embarking on this course of action, the Company is
working closely with its US legal counsel.
Lease Management
The Jolly Ranch project covers around 400,000 acres with over
500 separate leases in place, some with renewal options, some
without, and with a range of commercial terms. There has been a
substantial increase in leasing activity by other companies in
recent months and some of Nighthawk's early leases are now being
renewed, with a small proportion requiring new terms in an
increasingly competitive environment. The Company has initiated
actions and allocated funds to preserve key leases, to relinquish
less valuable acreage and to add additional attractive leases
wherever practicable.
The increased level of interest in the area has created more
opportunities for dialogue and discussion with neighbouring
operators, which may result in potential for co-operation and cost
sharing.
Stephen Gutteridge, Chairman of Nighthawk, commented:
"We continue to make progress on all aspects of the Jolly Ranch
project, a considerable achievement given the problems we inherited
from the previous operator. Production is gradually recovering,
although it is clear that achieving a substantial step-up in rates
requires success with the new wells and we are looking forward to
the commencement of the drilling program in August.
We will also pursue the claims against RFP that our extensive
work since January has identified, but we will not allow this to
distract us from delivering our development plan for Jolly
Ranch."
Chuck Wilson, Chief Operating Officer of Nighthawk, who has over
32 years of experience in the oil and gas industry and meets the
criteria of qualified persons under the AIM guidance note for
mining and oil and gas companies, has reviewed and approved the
technical information contained in this announcement.
- Ends-
Enquiries:
Nighthawk Energy plc
Stephen Gutteridge, Chairman
Richard Swindells, Chief Financial
Officer 020 3582 1350
Westhouse Securities Limited 020 7601 6100
Richard Baty richard.baty@westhousesecurities.com
FTI Consulting 020 7831 3113
Ben Brewerton ben.brewerton@fticonsulting.com
Ed Westropp edward.westropp@fticonsulting.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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