TIDMMSMN
RNS Number : 7992V
Mosman Oil and Gas Limited
07 November 2017
7 November 2017
Mosman Oil and Gas Limited
("Mosman" or the "Company")
General Operations Update
Mosman Oil and Gas Limited (AIM: MSMN) the oil exploration,
development and production company, announces an update in respect
to its current operations.
Strategy
Mosman's strategic objective continues to be that of identifying
opportunities which will provide operating cash flow and have
further development upside, in conjunction with adding value to the
Company's existing exploration permits.
Interests in three onshore US producing projects have been
acquired in 2017, demonstrating that the Company is moving forward
effectively in achieving its objectives of building a significant
production operation. The projects now have positive cash flow
after Lease Operating Expense (LOE), and the cash flow is expected
to increase after current workovers are completed.
As part of optimising its growth strategy, the Board is
cognisant it has to prioritise capital expenditure, manage
operating costs and continue to review growth plans to achieve
positive outcomes for shareholders.
This update is intended as a general update ahead of the
decision on the First Option to acquire an additional 20% of the
Arkoma project in mid-November as previously announced on 3 October
2017.
USA
Mosman now has interests in three producing projects, two in
Texas and one in Oklahoma. Each project is being run with a small
number of local contractors including Mosman's senior consultant
who is based in Dallas. The Company's Technical Director is in
frequent contact with relevant parties and will continue to attend
site visits on a regular basis and monitors activities closely.
Given the focus on costs and cash flow; it is not currently
intended to open an office or employ administration staff at the
three projects.
Strawn (Texas): 50% Working Interest and Operator
The Company continues to be pleased with activities and progress
at this project.
At Strawn, the initial workover program was completed.
Unsurprisingly in restoring a mature field, there has been some
minor repairs and maintenance required, and this has resulted in
some short term reduction in oil production.
A second stage of workovers has commenced, focused on bailing
sand from wells. We are particularly pleased by the results of the
current work which is providing significant increase in oil
production on the wells bailed so far.
Oil sales in October 2017 were 513 barrels (gross) of which 50%
is attributable to Mosman.
Welch Permian Basin Project (Texas): 100% Working Interest and
Operator
At Welch, Mosman has completed this acquisition and its US
operating subsidiary is now the Operator. A local full time
"pumper" has been engaged with operations management overview being
undertaken from an existing consultant based in Dallas. All
relevant technical data on the project has now been obtained from
the vendor.
Mosman has started workovers and the production optimisation
process, which is already making good progress.
Sales for October 2017 were 843 barrels (gross).
One of the previous owners of the Welch property had developed
plans for three horizontal wells based on adjacent acreage
analogues that could add potentially significant additional daily
production to this project. Following an initial high-level review,
the Company also expects that horizontal wells are likely to
provide significant potential production upside. The Board has now
resolved to commission a pre-feasibility study to quantity the
merits of implementing horizontal wells.
Arkoma Stacked Pay Project (Oklahoma): 10% Working Interest with
options over a further 45%
At Arkoma, Mosman's immediate focus remains the technical work
required to estimate the Reserves and Resources in order for it to
make the next investment decision in mid November.
On-site, the Operator continues to bring wells online and flow
test various zones. Mosman is in frequent contact with the Operator
including discussing and agreeing which zones to test.
Encouragingly, during this testing phase, the project's multiple
zone stacked pay production concept has been confirmed.
Production rates are variable between zones and the optimal
production plan will likely include co-mingling of production from
more than one zone in order to maximise production rates. The
effect of Electrical Submersible Pumps (ESP) is also being
evaluated on some wells.
Mosman will incorporate all this information into its investment
decision, together with the results of the independent expert
Reserves Report that is currently being compiled by Moyes &
Co.
Mosman currently owns 10% of the project and holds two options
over a total further 45% of the project, the First Option for 20%
exercisable in mid November 2017 for US$1 million and a Second
Option over 25% exercisable in March 2018 for US$425,000. Mosman's
strategic alliance partner Blackstone Oil and Gas Limited has an
option over 45% of the Project.
Two Directors will travel to Dallas this week to meet Moyes
& Co. representatives and the Arkoma vendors to discuss the
First Option to acquire an additional 20% of the Arkoma project, as
well as meetings with banks to discuss potential debt facilities
for existing and future production acquisitions.
AUSTRALIA
Amadeus Basin Permits
Mosman owns and operates two granted permits (EP 145 & 156)
and one application (EPA 155) and highlights the following:
-- The Northern Gas Pipeline ("NGP") has commenced construction
and, from 2018, will provide access for Northern Territory gas to
markets in Eastern Australia;
-- In EP145, technical work continues, aimed at finalising the
work programme for 2018. Application has been made to extend the
permit timeline;
-- In EP 156, technical work continues, involving integrating
the 8,116 km airborne survey into the geological model. Application
has been to extend the permit timeline; and
-- In EPA 155, the next step is to obtain native title approval,
with a site visit scheduled for mid-2018.
NEW ZEALAND
Murchison
Mosman has been advised previously by NZPAM that the Change of
Condition application made in December 2016 had been declined.
Mosman's application was to defer the work program to allow a
measured pace of exploration based on work to date However, the
length of time taken to get a decision on this and a prior
application left Mosman in a position whereby the Company had to
make a decision to acquire seismic and drill two wells prior to
April 2018, or surrender the permit.
Since the application for the licence in 2014, the decision by
NZPAM should be seen in the light of the significant drop in the
oil price, with the result investor appetite for expenditure on
long term frontier exploration has changed significantly. Whilst
the exploration potential remains untested, the commercial position
of a discovery in the South Island of NZ remains challenging, as
there are significant capital and operating costs of transporting
any oil or gas to market. Furthermore, there are currently no NZ
approved drilling rigs on the South Island of NZ.
Given the short lead time associated with the work commitments
and significant cost obligations imposed between now and April
2018, the Board has had to make a difficult decision based on the
best interests of shareholders and has, regretfully, decided to
surrender the permit.
Petroleum Creek
Planning continues for the three wells drilled to be plugged and
abandoned.
The freehold property at Petroleum Creek has now been listed for
sale, and that sale is expected to cover the abandonment costs.
New Business Opportunities
Other potential production acquisitions remain under review.
Mosman is carefully looking to balance the risk, reward, human
resources and funding requirements in respect of all opportunities
currently under review in order to optimise shareholder value.
It is not possible to provide further information due to deal
uncertainties and confidentiality requirements. The Board will
provide further details in due course at the appropriate time.
Investments
Mosman owns some 9.6 million shares in the TSX-V listed Gem
International Resources Inc. (GEM; TSX-V: GI)
Mosman is disappointed with the performance of GEM and its
Board.
Mosman has now issued a requisition of meeting to remove all
current Directors and replace them with nominees of Mosman.
Corporate Matters
At the Board meeting held on 6 November several key decisions
were made that impact on the 30 June 2017 Financial Statements
including;
1. In accordance with the Company's accounting policies, all
accrued exploration expenditure for both the Murchison and
Greymouth projects that was previously capitalised on the Balance
Sheet, has now been expensed. This will result in a once off charge
to the Profit and Loss Account; and
2. The freehold land and buildings at Greymouth have been put up
for sale. The Board anticipates they will be sold in the next few
months
The Financial Statements are now expected to be published later
this month.
Competent Person's Statement
The information contained in this announcement has been reviewed
and approved by Andy Carroll, Technical Director for Mosman, who
has over 35 years of relevant experience in the oil industry. Mr.
Carroll is a member of the Society of Petroleum Engineers.
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
Enquiries:
Mosman Oil & Gas Limited NOMAD and Broker
John W Barr, Executive Chairman SP Angel Corporate Finance LLP
Andy Carroll, Technical Director Stuart Gledhill / Richard Hail
jwbarr@mosmanoilandgas.com / Soltan Tagiev
acarroll@mosmanoilandgas.com +44 (0) 20 3470 0470
Gable Communications Limited
Justine James / John Bick
+44 (0) 20 7193 7463
mosman@gablecommunications.com
Updates on the Company's activities are regularly posted on its
website
www.mosmanoilandgas.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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