TIDMLRL
RNS Number : 5544K
Leyshon Resources Limited
31 July 2013
31 July 2013
Leyshon Resources Limited
JUNE 2013 QUARTERLY REPORT
Leyshon Resources Limited (AIM/ASX:LRL) ("Leyshon" or the
"Company") is pleased to provide an update on the progress made
during the second quarter of 2013.
The Company, through its wholly owned subsidiary Pacific Asia
Petroleum Limited (PAPL), has commenced an accelerated exploration
and appraisal programme for its Zijinshan Gas Project on the
eastern fringe of the prolific Ordos Gas Basin in Central
China.
PAPL has a 100% interest in the exploration phase of the
Production Sharing Contract (PSC) with China National Petroleum
Corporation, which has the right to back in to a 40% interest at
the development stage.
The main objective of the 2013 work programme is to define a
resource sufficient to delineate a third party independent resource
by the end of 2013 and to submit a Chinese Reserve Report (CRR) by
mid 2014.
The main components of the programme comprise drilling up to six
wells, conducting eight flow tests and acquiring 300 kilometres of
2D seismic data. Three of the wells are committed and the
additional three are subject to results and PSC partner agreement.
It should be noted that drilling of these additional wells will be
dependent on favourable results from both the testing and seismic
programmes.
It should be noted that the programme remains at an early stage
in the exploration and appraisal phase of de-risking the project
and accordingly each well will be fully evaluated before proceeding
with the subsequent well.
Flow Testing
Following the hydraulic facture stimulation of one of the target
zones in well ZJS5 a free gas flow rate of 160,000 scf/day was
recorded over eight hours of stable flow at a tubing head pressure
of 200psi. The initial flow rate recorded on the single zone
exceeded management's internal estimate for commercial production
of 125,000 scf/day.
Analysis of the results to date suggests that further flow may
be possible from untested potential pay zones. Following a three
week shut-in period a formation pressure test on a single zone
recorded 16.5MPa/2425psi, significantly higher than that recorded
in nearby wells in the same strata.
Testing of well ZJS6 was suspended due to technical issues. The
well has a total depth of 2,320 metres with 80 metres of cumulative
potential pay interval intersected across 15 potential pay zones.
Several of the zones tested, which elsewhere in the field are dry,
produced water. It has not been possible to isolate or to
accurately define the source of the water nor to determine whether
these are issues specific to well ZJS6 or more general to this area
of the licence.
Accordingly the decision has been made to discontinue testing on
the well for the time being and to focus exploration and appraisal
efforts on the upcoming programme.
It is possible that the well may be revisited at later date to
attempt to isolate the water and to test different zones. However
very useful information on the target zones has been gathered which
will be valuable for testing future well.
Drilling
The drilling of well ZJS7 has commenced at a location
approximately three kilometres to the northeast of well ZJS5.
Whilst torrential rain delayed the mobilization of the rig for over
two weeks the extreme weather conditions are not expected to have
any further significant impact on the drilling operations, which
are expected to take approximately 4-5 weeks. The well has a design
depth of approximately 2,100 metres and is targeting the same
potential pay zones as those intersected in well ZJS5.
Seismic
Interpretation of the recently acquired 318 kilometers of 2D
seismic data has been completed. Initially the results will be used
to assist in locating future wells and later to assist in resource
assessment. The results are also required as supporting data for
the CRR submission.
Health & Safety
A total of 279,156 man hours of incident-free field operations
have been achieved to date.
Exploration Period Renewal
Agreement has been reached between Company'swholly owned
subsidiary Pacific Asia Petroleum Limited (PAPL) and its partner on
the Zijinshan Production Sharing Contract (PSC) to extend the
exploration period of the PSC to the end of 2017. The PSC is valid
for 30 years and expires in 2038.
PAPL has met all the requirements for the extension and an
application was submitted well ahead of the required date. The
preparation for the extension commenced late last year and is
expected to take several months to complete. An announcement will
be made once the process has completed. It is common for extension
applications, once agreed between the PSC partners, to extend
beyond the date of expiry whilst the various regulatory approvals
are achieved and for exploration activities to continue as normal
during this period.
Gas Pricing Reform
The National Development and Reform Commission recently
announced an updated nationwide gas price increase scheme.
Effective from July 2013, a two-tier gas pricing system will
increase the city gate prices to a range between U$13.4 per mscf to
US$15.1 per mscf.
WellsZJS5, ZJS6 and ZJS7 are located within approximately 10
kilometres of a tie-in point on the recently commissioned Lin-Lin
pipeline which supplies the growing demand in Shanxi Province.
Recent discussions with potential off-take partners suggest that
there continues to be a shortage of locally sourced gas to feed the
pipeline and as a result prices are continuing to rise.
Regulatory Reform
The State Council, China's cabinet, announced in May the
abolition of the requirement for central government approval for
certain project approvals, including:
The abolition of the requirement for approval from the Ministry
of Commerce for entering into or modifying PSCs in the oil and gas
industry and;
the abolition of the requirement for National Development and
Reform Commission approval for Overall Development Plan (ODP) for
gas projects with annual production of less than 2 billion cubic
meters.
The abolition and decentralization of these important approvals
are targeted reforms aimed at encouraging investment in the sector
and accelerating gas production. These reforms will devolve the
major approvals to provincial authorities which is expected to
result in streamlined approvals for the Zijinshan project.
Further to these reforms the company has recently been
informally advised by the Shanxi Provincial authorities that the
Zijinshan Project is expected to be selected as a supported foreign
investment in Lin County meaning that the project and its owners
will receive some local preferential treatment including potential
tax benefits.
Cash and Liquidity
The Company is well placed to carry out its 2013 exploration and
appraisal programme with a strong cash position of US$40 million
(unaudited), held mainly in US dollars. With 249 million ordinary
shares on issue this represents approximately US$16 cents per
share, A$18 cents per share and 10 pence per share.
It has a further 17 million shares available to be purchased in
the current on-market share buy- back up to September 2013. The
cash position does not take into account interest due nor all of
the current liabilities.
The Company continues to achieve excellent liquidity in its
shares, especially on the SETSqx trading platform on AIM.
Energy and Gold
The Company is now actively looking at acquisition and
investment opportunities in the oil and gas sector in locations and
projects where it can bring its China advantages to bear.
It is also exploring the merit of whether to separate its energy
and gold businesses and will make appropriate notifications in due
course.
Managing Director Paul Atherley commented:
"Whilst the project is in its early stages it is encouraging to
have the government policy wind in our sails. The progressive
reforms are lifting gas prices and streamlining major approvals for
foreign investors.
We remain confident that if we can de-risk the project from a
technical perspective we are well positioned to translate it into a
commercial success."
For further informationplease contact:
Leyshon Resources Limited
Paul Atherley - Managing Director
Tel:+8613718001914 admin@leyshonresources.com
Cantor Fitzgerald Europe
David Porter/Stewart Dickson (Nominated adviser)
Richard Redmayne (Corporate broking)
Tel: +44 (0)20 7894 7000
Pelham Bell Pottinger
Charles Vivian /James MacFarlane
Tel:+44 (0)20 7861 3232
Background
http://www.leyshonresources.com
Leyshon was on the ground in 2003 when China opened its mining
sector to foreign investment. It has been fully engaged in China
since then and has its main operating office located in
Beijing.
China overtook the United States as the world's largest energy
consumer in 2010, however on a per capita basis it still only
consumes about 25% of the energy of the most developed nations. The
government has recently described the country's increasing
dependence on foreign energy sources as one of the "Grave
challenges to energy security".
Its main policy response to this challenge is the rapid
development of domestic unconventional gas resources, with a
particularly focus on the Eastern Flank of the Ordos Basin. The aim
is to rapidly increase the output of unconventional gas from the
currently very low levels to an annual production of 6.5 billion
cubic metres by 2015.
Leyshon, along with its partner China National Petroleum
Corporation, is one of small number of companies exploring for and
looking to develop unconventional gas production in the Eastern
Flank of the Ordos Basin.
Managing Director Paul Atherley is the Vice Chairman of the
China Britain Business Council and serves on the European Union
Chamber Energy Working Group.
The qualified person, Frank Fu, who has reviewed this update,
has 21 years' experience in the oil & gas industry and is a
member of the Society of Petroleum Engineers.
Frank is currently the Chief Operations Officer for the Company
based in the Beijing office. He holds a BS in Geology and
Exploration in Shanxi Mining College in Taiyuan, Shanxi. He joined
Company in 2012 having spent the majority of his career at
ConocoPhillips in China and on its overseas gas and oil
projects.
Rule 5.3
Appendix 5B
Mining exploration entity quarterly report
Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98,
30/9/2001, 01/06/10.
Name of entity
LEYSHON RESOURCES LIMITED
-------------------------
ABN Quarter ended ("current
quarter")
75 010 482 274 30 June 2013
--------------- -----------------------
Consolidated statement of cash flows
Cash flows related to operating Current quarter Year to date
activities
(6 months)
$US'000 $US'000
---------------- -------------
1.1 Receipts from product sales - -
and related debtors
Payments for (a) exploration
& evaluation (802) (2,230)
(b) development - -
(c) production - -
1.2 (d) administration (574) (905)
1.3 Dividends received - -
Interest and other items
1.4 of a similar nature received 367 1,260
1.5 Interest and other costs - -
of finance paid
1.6 Income taxes paid (144) (171)
Other Mt Leyshon holding
1.7 costs (16) (548)
Net Operating Cash Flows (1,169) (2,594)
----- ---------------------------------- ---------------- -------------
Cash flows related to investing
activities
Payment for purchases of:
(a) prospects - -
(b) equity investments - -
1.8 (c) other fixed assets (84) (108)
1.9 Proceeds from sale of:
(a) prospects - -
(b) equity investments - -
(c) other fixed assets - -
1.10 Loans to other entities - -
1.11 Loans repaid by other entities - -
1.12 Other - -
Net investing cash flows (84) (108)
---------------- -------------
Total operating and investing
1.13 cash flows (carried forward) (1,253) (2,702)
----- ---------------------------------- ---------------- -------------
Total operating and investing
1.13 cash flows (brought forward) (1,253) (2,702)
----- ----------------------------------
Cash flows related to financing
activities
1.14 Proceeds from issues of shares, - -
options, etc.
1.15 Proceeds from sale of forfeited - -
shares
1.16 Proceeds from borrowings - -
1.17 Repayment of borrowings - -
1.18 Dividends paid - -
1.19 Other - Share buy-back costs - -
Other - Transaction costs - -
---------- ----------
Net financing cash flows
- -
----- ---------------------------------- ----------
Net increase (decrease) in
cash held (1,253) (2,702)
Cash at beginning of quarter/year
1.20 to date 45,770 47,254
Exchange rate adjustments
1.21 to item 1.20 (4,395) (4,430)
---------- ----------
1.22 Cash at end of quarter 40,122 40,122
----- ---------------------------------- ---------- ----------
Payments to directors of the entity and associates of the
directors
Payments to related entities of the entity and associates of the
related entities
Current quarter
$US'000
----------------
Aggregate amount of payments to the parties
1.23 included in item 1.2 424
----------------
1.24 Aggregate amount of loans to the parties -
included in item 1.10
-------- -------------------------------------------------- ----------------
1.25 Explanation necessary for an understanding of the transactions
Payments include managing director's remuneration and
non-executive directors' fees.
-----------------------------------------------------------------------------
Non-cash financing and investing activities
2.1 Details of financing and investing transactions which
have had a material effect on consolidated assets and
liabilities but did not involve cash flows
Not Applicable.
-------------------------------------------------------
2.2 Details of outlays made by other entities to establish
or increase their share in projects in which the reporting
entity has an interest
Not Applicable.
------------------------------------------------------------
Financing facilities available
Add notes as necessary for an understanding of the position.
Amount available Amount used
$US'000 $US'000
3.1 Loan facilities - -
----------------- ------------
3.2 Credit standby arrangements - -
---- ---------------------------- ----------------- ------------
Estimated cash outflows for next quarter
$US'000
--------
4.1 Exploration and evaluation 3,500
--------
4.2 Development
-
--------
4.3 Production
-
--------
4.4 Administration 500
--------
Total 4,000
---- --------------------------- --------
Reconciliation of cash
Reconciliation of cash at the Current quarter Previous quarter
end of the quarter (as shown $US'000 $US'000
in the consolidated statement
of cash flows) to the related
items in the accounts is as follows.
---------------------------------------- ---------------- -----------------
5.1 Cash on hand and at bank 40,122 8,992
---------------- -----------------
5.2 Deposits at call - 36,778
---------------- -----------------
5.3 Bank overdraft
- -
---------------- -----------------
5.4 Other (provide details)
- -
---------------- -----------------
Total: cash at end of quarter
(item 1.22) 40,122 45,770
----- --------------------------------- ---------------- -----------------
Changes in interests in mining tenements
Tenement Nature of interest Interest Interest
reference (note (2)) at beginning at end
of quarter of quarter
----------- ------------------- -------------- ------------
6.1 Interests in mining None - - -
tenements relinquished,
reduced or lapsed
----------- ------------------- -------------- ------------
6.2 Interests in mining None - - -
tenements acquired
or increased
----------- ------------------- -------------- ------------
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or
conversion rights together with prices and dates.
Total number Number quoted Issue price Amount paid
per security up per security
(see note (see note 3)
3) (cents) (cents)
---------------------------- ------------- -------------- --------------- -----------------
7.1 Preference
+securities
(description)
------------- -------------- --------------- -----------------
7.2 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through returns
of capital,
buy-backs,
redemptions
----- --------------------- ------------- -------------- --------------- -----------------
+Ordinary
7.3 securities 249,457,212 249,457,212 Not Applicable Not Applicable
------------- -------------- --------------- -----------------
7.4 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through returns
of capital,
buy-backs
7.5 +Convertible
debt securities
(description)
------------- -------------- --------------- -----------------
7.6 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through securities
matured,
converted
7.7 Options (description Exercise Expiry date
and conversion price
factor)
------------- -------------- --------------- -----------------
7.8 Issued during
quarter
------------- -------------- --------------- -----------------
7.9 Exercised
during quarter
------------- -------------- --------------- -----------------
7.10 Expired during
quarter
------------- --------------
7.11 Debentures
(totals only)
------------- --------------
7.12 Unsecured
notes (totals
only)
------------- --------------
Compliance statement
1 This statement has been prepared under accounting policies
which comply with accounting standards as defined in the
Corporations Act or other standards acceptable to ASX (see note
4).
2 This statement does /does not* (delete one) give a true and
fair view of the matters disclosed.
Sign here:
............................................................ Date:
..31 July 2013.
(Director/Company secretary)
Print name: . MURRAY WYLIE.
Notes
1 The quarterly report provides a basis for informing the market
how the entity's activities have been financed for the past quarter
and the effect on its cash position. An entity wanting to disclose
additional information is encouraged to do so, in a note or notes
attached to this report.
2 The "Nature of interest" (items 6.1 and 6.2) includes options
in respect of interests in mining tenements acquired, exercised or
lapsed during the reporting period. If the entity is involved in a
joint venture agreement and there are conditions precedent which
will change its percentage interest in a mining tenement, it should
disclose the change of percentage interest and conditions precedent
in the list required for items 6.1 and 6.2.
3 Issued and quoted securities The issue price and amount paid
up is not required in items 7.1 and 7.3 for fully paid
securities.
4 The definitions in, and provisions of, AASB 1022: Accounting
for Extractive Industries and AASB 1026: Statement of Cash Flows
apply to this report.
5 Accounting Standards ASX will accept, for example, the use of
International Accounting Standards for foreign entities. If the
standards used do not address a topic, the Australian standard on
that topic (if any) must be complied with.
== == == == ==
This information is provided by RNS
The company news service from the London Stock Exchange
END
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