TIDMENEG
RNS Number : 0247Z
Enegi Oil PLC
08 December 2014
ENEGI OIL PLC
AIM ticker: 'ENEG'
OTC ticker: 'EOLPF'
8 December 2014
Enegi Oil Plc
("Enegi" or "the Company")
Update on Western Newfoundland Activities
Enegi today provides the following update on its Western
Newfoundland activities.
Key Points:
-- Enegi has mutually agreed with BSE to terminate the Farm-In.
This will enable the Company to implement plans that will have
faster results and are more appropriate for a regional development
play such as western Newfoundland;
-- Enegi believes that an incremental work programme, where the
Company aims to be carried, provides the most appropriate route to
further prove and develop the area and, in line with its stated
strategy of focusing on marginal field development, to partially
divest its interest in Newfoundland given the challenges of working
in this remote location. The major benefit is that no capital will
need to be raised by Enegi;
-- The incremental investment plan centres on an Early Field
Development ("EFD") that invites E&P companies and oilfield
service companies to share a portion of phased development costs
and risk in exchange for information, license equity and guaranteed
services ;
-- Enegi is in discussions with number of parties and possible
partners to fund and deliver the EFD plan;
-- Updated subsurface evaluation indicates the Garden Hill Field
Trend could contain 406mmbbl STOIIP with 85mmbbl recoverable in the
P50 case.
-- The Company believes that the EFD plan, once executed, will
accelerate not only the development of its own licences with no
additional capital outlay, but western Newfoundland generally, to
create the infrastructure and activity proportionate to the oil and
gas potential.
Alan Minty, CEO and Chairman of Enegi Oil commented:
"Whilst disappointed that it has not been possible to complete
the objectives of the farm out with BSE we recognise the problems
of concluding investment for large scale plans in the current
climate. We have known for a long time that more careful management
of investment risks, expectations, delivery timeframes and costs
are required in the current economic environment in the oil and gas
sector. Most importantly, though, our plans are based on utilising
information and existing licences to attract future staged
investment to achieve realistic and relatively short-term goals.
The plan, which we refer to as Early Field Development Plan, is
based on similar principles as underpin the marginal field
initiative, which is to assess the value of prior investment not
just as a sunken cost, but as a means to develop confidence in
future outcomes. It is the continuing subsurface assessments that
create and re-affirm our confidence in the region. We look forward
to providing further updates as we progress the EFD plan."
Mutual Termination of Farm-In
As announced on 24 July 2013, the Company entered into a
definitive Farm-In Agreement ("the Farm-In") with Black Spruce
Exploration ("BSE") in relation to its Newfoundland assets,
PL2002-01(A), EL1116 and EL1070 (together "the Assets"). Enegi
confirms that, on 4 December 2014, it mutually agreed with BSE to
terminate the Farm-In.
Throughout the period of the Farm-In, the Company has continued
to invest in subsurface evaluation of the Assets and, as stated in
its news release dated 29 August 2014, received a conditional offer
to partially divest itself of its interests in the Assets. Having
considered the terms of the offer, the Company does not believe it
to be in the best interests of shareholders presently and that the
Early Field Development ("EDF") plan outlined below provides the
most appropriate route to further prove and develop the area in a
manner consistent with its stated strategy to focus on marginal
field development through the full or partial divestment of its
other assets, as appropriate. Further details of the subsurface
evaluation are provided in subsequent sections.
The Company believes it is best positioned to implement
appropriate plans to develop the opportunity presented by the
Assets, having regard to its expertise of developing solutions for
marginal assets and its operational experience of running drilling
campaigns in western Newfoundland.
Delivering an "Early Field Development" Plan
Western Newfoundland contains a wide range and variety of plays
and prospects, but suffers from a lack of significant activity
owing to its remote location and relative lack of infrastructure
and services. This has stunted its potential for growth and has
created an unnecessarily challenging environment in which to
operate.
To address this, Enegi has formulated an Early Field Development
("EFD") plan after discussions with a number of parties and
possible partners. The EFD plan is based upon principles
incorporated in the Company's marginal field initiative, where
existing data is re--assessed to determine both its current value
and the investment necessary to advance a project to another phase.
This incremental investment reduces the huge uncertainty that
permeates exploration projects, which creates delays in activity
and in approval of decisions and which contributes hugely to the
cost escalation which is such a feature of the oil and gas sector.
The simple principle that underpins the EFD concept is to utilise
the licence and existing knowledge to create the value on which
further investment is sought. The incremental investment is
determined by the success, or otherwise, of the preceding phase and
is targeted at improving the underlying knowledge base and value
rather than being focused on a long term objective where the risks
cannot be accurately calculated at the outset. Consequently, each
phase of investment is carefully formulated to understand the risks
associated with the funds being directly applied to that project
phase.
The directors believe that the benefit for Enegi through the EFD
plan is significant as, through the sale of data and equity in
existing licences, the Company can effectively deliver an
incremental and faster farm-in model, which it believes will carry
the Company for future investment and reduce the risks to the
farmee. The Company expects both oilfield service companies and
E&P companies to participate in the EFD plan, which will
initially focus on delineating and developing the discovered
"Garden Hill Field Trend" before expanding operations to look at
wider prospects. Activity generated by implementing the EFD plan is
expected to act as a catalyst for increased oil and gas activity in
Western Newfoundland. Subscribers to the EFD plan will each be
invited to share a portion of phased development costs and risk in
exchange for information, equity, guaranteed services and other
returns.
The most recent internal subsurface model revision estimates
that 406mmbbl STOIIP may be contained within the field trend, of
which 85mmbbl could be recoverable in the P50 case. The table below
shows the portion contained in acreage currently held by Enegi.
PL2002-01(A) & EL1116 P90 P50 P10
-------------------------- ---- ---- ----
Total In-Place (MMBO) 136 283 591
Total Recoverable (MMBO) 26 59 134
-------------------------- ---- ---- ----
EFD Plan Implementation and Work Programme
Taking into account, and with reference to, the subsurface
evaluation outlined in this announcement, the EFD plan envisages a
work programme comprising four distinct value accretive phases:
-- Phase 1: Drill a production well from the existing Garden
Hill Site ("GHS") targeting the reservoir in a down-dip location
from the existing PaP#1-ST#3 well (the "Well"), into a central
position within the mapped field trend, which is linked with
enhanced productivity in analogous field trends. The well will
gather new reservoir data, which can be used to de-risk and prove
up a significant volume of reserves and contingent resources.
-- Phase 2: Drill a production well up-dip from the Well,
targeting the reservoir within established proximity of the thrust,
whilst deviating along the length of the field trend. The well will
aim to establish lateral connectivity and communication within the
reservoir (between wells), demonstrating continuation of the field
trend.
-- Phase 3: Acquire new seismic data to allow high-resolution
enhanced mapping of the Garden Hill Field Trend and other
prospective trends identified in the surrounding area.
-- Phase 4: Based on the captured data and revised models, a
multi-well drilling campaign will be designed to boost sustainable
production from the field, thereby maximizing oil recovery and
unlocking the potential of surrounding prospects and trends.
Western Newfoundland Subsurface Evaluation
The west coast of Newfoundland is on the margin of the Anticosti
Basin and the Company believes it to be one of the remaining
frontier areas containing significant hydrocarbon potential. Enegi,
through its involvement in the region for the past eight years, has
identified a number of significant exploration plays and prospects,
both conventional and unconventional, alongside the discovered
"Garden Hill Field Trend" that extends on-to-off shore, using the
results gathered from its own investment and utilising data from
previous operators.
Employing modern techniques and incorporating production data
from the Well, Enegi has developed a revised model that not only
accounts for previous results, but also indicates a large
discovered trend that has considerable surrounding upside - the
Garden Hill Field Trend. To reach this stage, the Company has
integrated and interpreted approximately 2,500 line km of 2D
seismic data around and over the Port au Port Peninsula, and has
completed a refined structural depth model that extends across
PL2002--01(A), into EL1116 to the southwest, and also into the
disputed acreage to the northeast (formerly held by Enegi under
PL2002-01 and subject to judicial review following the DNR's
decision in 2012 to limit the extent of the renewal).
The analysis suggests that the reservoir around the Well is
continually recharged due to its location on the margin of the
Garden Hill Field Trend, where greater productivity wells can be
placed in future. This is consistent with field trends such as
Albion-Scipio and Lima-Indiana, which share similarly aged and
altered reservoirs and lie along the Appalachian structural front,
in the United States. Combined, these two proliferous field trends
have recovered over 600mmbbls.
As well as defining the presence and extent of the Garden Hill
Field Trend, a number of similar prospective trends have been
identified along parallel and adjacent structural features. This
too is consistent with what was experienced by the analogous
Albion-Scipio Field Trend, following more recent activity. Such
observations, once established, have the potential to build
significantly upon the upside around the Port au Port region, and
similarly along the west coast of Newfoundland where this play
concept is present.
Enegi Oil Tel: + 44 161 817 7460
Alan Minty, CEO
Nick Elwes, Director of Communications
Cenkos Securities
Neil McDonald Tel: + 44 131 220 9771
Derrick Lee Tel: +44 131 220 6939
www.enegioil.com
Facebook (Enegi Oil PLC)
Twitter (@enegioil)
Qualified Persons
The information in this release has been reviewed by Barath
Rajgopaul MSc (Mech. Eng.) C. Eng, a member of the Advisory Panel
of Enegi. Mr. Rajgopaul has over 30 years' experience in the
petroleum industry.
Notes to Editors
Enegi Oil Plc is an independent oil and gas company whose
strategy is to build a diverse portfolio of assets with a strong
emphasis on acquiring interests in marginal fields. These marginal
fields are low risk highly-appraised projects and consequently the
Company's entry cost will be low. Enegi will look to develop these
assets utilising ABTechnology's buoyant solutions, which are
appropriate and change the development economics of a project. This
is also expected to enable the early booking of reserves. The
Company's current portfolio is made up of operations focused on
opportunities around the Port au Port Peninsula in Newfoundland,
Canada, the UK North Sea and Jordan. The Port au Port Peninsula is
located in western Newfoundland, which, although lightly explored,
is in an active petroleum system with light oil having been
discovered on a number of occasions. The Company's licences in the
UK North Sea have discovered hydrocarbons on them and have been
selected based on buoy technology operating criteria. The Company
has also entered into the highly prospective Dead Sea and Wadi
Araba Block in Jordan with its partner Korea Global Energy
Corporation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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