TIDMPGR
RNS Number : 4111H
Phoenix Global Resources PLC
15 November 2018
15 November 2018
Phoenix Global Resources plc
("Phoenix" or the "company")
Q3 2018 Operational Update
Phoenix Global Resources plc (AIM: PGR; BCBA: PGR), the upstream
oil and gas company offering its investors an opportunity to invest
directly into Argentina's Vaca Muerta shale formation and other
unconventional resources, is pleased to announce its operational
update for the third quarter of 2018 together with an update on
planned drilling and other operational activity for the next six
months.
Operational highlights
* Drilling and completions campaign commenced at Puesto
Rojas with seven unconventional completions in the
period
* Unconventional permits for Mendoza completions
campaign successfully secured in August 2018
* Completed wells currently in flowback prior to
extended well testing
* First unconventional horizontal well at Mata Mora
spudded in September 2018 with drilling of the
vertical portion currently underway
* Average working interest daily production of 9,748
boepd (Q2 2018: 10,442 boepd), comprising 68% oil and
32% gas. Daily production was lower as a result of
downtime of certain wells at Puesto Rojas to allow
for unconventional completions at nearby wells.
Financial performance (unaudited)
* Revenue of US$43.17 million and EBITDAX of US$17.05
million
* Average realised prices, before hedge, of US$51.53/
boe (comprised oil US$60.66/ bbl; gas US$4.40/ mcf)
* Operating costs per boe of US$15.94/ boe (Q2
US$18.07/ boe)
* Realised netback per boe of US$25.67/ boe (Q2
US$23.45/ boe )
* Capital expenditure of US$33.0 million
* Exploration expense of US$4.8 million recognised
related to an unsuccessful appraisal well at Laguna
El Loro
* Net debt of US$142.8 million at 30 September 2018
* Available cash and undrawn facilities of US$29.7
million at 30 September 2018
Outlook
* One additional horizontal evaluation well planned to
spud at Mata Mora on completion of the well currently
being drilled
* Discussions on additional tranche of funding
commenced with Mercuria
* Initial results from the Puesto Rojas vertical wells
completed in 2H 2018 expected in early 2019
Anuj Sharma, CEO, said:
"I am delighted to announce the significant increase in
unconventional activity across our substantial acreage in
Argentina. The company's primary focus in the period has been the
unconventional drilling and completions campaign at Puesto Rojas
and aimed at the appraisal of the significant potential of both the
Vaca Muerta and Agrio formations. In September, the company also
commenced drilling the first of two unconventional horizontal wells
planned at Mata Mora, both of which target the Vaca Muerta
formation.
These achievements represent a significant increase in the
company's unconventional activity in Argentina and are a
significant milestone event in the continued development of our
world class asset base."
For further information, please contact:
Phoenix Global Resources Anuj Sharma, CEO T: +54 11 5258 7500
plc Kevin Dennehy
Stockdale Securities Antonio Bossi T: +44 20 7601 6100
Ed Thomas
Panmure Gordon Charles Lesser T: +44 20 7886 2500
Adam James
Camarco Billy Clegg T: +44 20 3757 4980
Owen Roberts
James Crothers
Qualified Person Review
In accordance with AIM guidance for mining, oil and gas
companies, Mr. Javier Vallesi and Mr. Greg
Easley have reviewed the information contained in this
announcement. Mr. Vallesi, Chief Operating
Officer of the group, is a petroleum engineer with over 22 years
of experience in the oil and gas
industry and is a member of the Argentinian Institute of Oil and
Gas. Mr. Easley, Senior Manager -
Reservoir and Engineering, is a petroleum engineer with over 10
years of experience in the oil and gas industry, is a licenced
Professional Engineer in the State of Texas and is a member of the
Society of Petroleum Engineers.
About Phoenix
Phoenix Global Resources is a London Stock Exchange (AIM: PGR)
and Buenos Aires Stock Exchange (BCBA: PGR) listed independent
Argentina focused oil and gas exploration and production company.
The Company has over 6.3 million licensed working interest acres in
Argentina (of which over 5 million are operated), 57.2 million boe
of working interest 2P reserves and average production of
approximately 9,750 working interest boepd in Q3 2018. Phoenix has
significant exposure to the unconventional opportunity in Argentina
through its 560,000 working interest acres with Vaca Muerta
potential.
The company's website is www.phoenixglobalresources.com
Q3 2018 production
Average total daily production volumes in Q3 2018 compared to
full year 2017 and Q2 2018 was as follows:
Production (boepd)
FY 2017 Q2 2018 Q3 2018
-------- --------
11,070 10,422 9,748
-------- --------
Total average daily production was down in the quarter compared
to Q2 2018 (6.7%) and FY 2017 (11.9%). This decrease was mainly due
to several of the more prolific wells in the Puesto Rojas area
experiencing downtime. In addition to normal operational downtime,
higher downtime was required at some conventional wells to allow
for nearby unconventional completions to be undertaken safely.
Drilling and completions campaign
Puesto Rojas Area
In August 2018, the company secured the necessary unconventional
permits from Mendoza Province to allow further drilling at the
Puesto Rojas area and for the company to undertake unconventional
completion of wells previously drilled. These initial wells at
Puesto Rojas are part of the early phase of exploration and
evaluation on the respective concessions aimed at determining the
optimum completion methodology for the different Vaca Muerta and
Tight Agrio formations present in the acreage.
The company's planned unconventional activity in Mendoza
Province was suspended from late 2017 and through much of the first
half of 2018 as the provincial government finalised regulations to
govern the environmental aspects of the unconventional oil and gas
activity in Mendoza Province. Following the issue of the new
regulations, a permitting process had to be established and
complied with before work could commence.
The completions campaign commenced in August 2018 with seven
wells completed to date. The seven completions have been undertaken
across the Cerro Medio (3), Cerro Pencal (2), Cerro los Choiques
(1) and Puesto Rojas (1) fields. The completed wells are currently
in the flowback stage where the completion fluids are recovered
from the well following which the level of initial production for
each well can be assessed. The company is flowing back the wells on
a formation-by-formation basis which, while lengthening the time
that the flowback stage will take, gives significantly more
information about the most productive horizons and, ultimately, the
best drilling and production targets.
In the initial production phase of these wells, the choke and
pump configuration will also be optimised to allow estimates of
production potential and the estimated ultimate recovery (EUR) to
be assessed on a well-by-well and formation-by-formation basis
Three of the wells that have been completed are testing the full
interval from the base of the Vaca Muerta formation through the
shallower Tight Agrio formation. Two other well completions have
been tailored to add productive intervals in the Tight Agrio
formation while two others have been selectively tested in the Vaca
Muerta and Tight Agrio sections.
The company expects to provide further information regarding the
the results of its Puesto Rojas drilling and completions campaign
in conjunction with the reporting of the full year results for
2018. Those results will also include discussion of the evolution
of the reserves and resources profile following this current
campaign.
In addition to the seven well completions discussed above, the
company has also drilled and completed the CDM-3012 unconventional
well at Cerro Del Medio. This well represents an initial tailored
completion in the Vaca Muerta interval aimed at gathering more data
on the zone in advance of the drilling programme planned for the
remainder of 2018 and into early 2019.
Mata Mora
Following the drilling activity in Río Negro Province (Laguna El
Loro Block) the Nabors rig was moved to the Mata Mora field in
Neuquén province to commence drilling of the company's first
horizontal well into the Vaca Muerta formation.
This first horizontal well spudded in September and, during the
drilling of the vertical section, a gas kick was experienced at the
top of the Vaca Muerta formation. Such kicks are not uncommon in
the Vaca Muerta and the rig being used to drill the well was
pre-specified with a Managed Pressure Drilling system to deal with
such an issue should it arise. The kick resulted in pressure
control issues that were successfully managed thereby stabilising
the well. Drilling was able to safely resume following certain
modifications to the well design.
The drilling of the horizontal section has now commenced. Once
this section is complete and the production casing is set, the rig
will move to drill the second well from the same pad.
Business development activity
During the third quarter the company participated in the August
Neuquén open bid round and submitted a bid for the Corralera
Noroeste block. If successful, this will unify the company's
interest in the Corralera block, adding to the acreage already
secured at Correlera Sur and Corralera Noreste in April 2018. The
company believes that the addition of Corralera Noroeste could add
up to 26,000 additional acres of Vaca Muerta and Tight Agrio
potential proximate to the company's existing licenses.
Production operations
Neuquina basin
Production (boepd)
FY 2017 Q2 2018 Q3 2018
-------- --------
5,026 4,588 4,157
-------- --------
Puesto Rojas Area
Production (boepd)
FY 2017 Q2 2018 Q3 2018
-------- --------
2,697 1,987 1,649
-------- --------
The production decrease at Puesto Rojas was due to several key
wells including the CDM-3002, CP-1014, and CP-1010 being shut-in
for maintenance and necessary well repairs. The prolific CDM-3002
well was shut in for a total of 20 days due to its proximity to the
completion operations being undertaken on wells at Puesto Rojas
discussed above. Following this work the well came back on line and
returned to production at more than 500 bpd. In addition, unplanned
downtime was incurred at certain locations at Puesto Rojas due to
unusually high winds in the area that caused wells to be shut-in
for HSE reasons.
Other work undertaken at Puesto Rojas in Q3 included the
isolation of gas producing perforations in the CP-1009 well to
improve oil production. A pump was changed on CP-1010 after a brief
drop in production and, following the changeout, the well returned
to its approximately 120 bpd production rate. In addition, the rod
pump previously in place at CP-1014 was changed to an ESP allowing
for increased capacity and adding a further 60 bpd of
production.
Chachahuen Sur (non-operated)
Production (boepd)
FY 2017 Q2 2018 Q3 2018
-------- --------
1,976 2,426 2,311
-------- --------
Production at Chachahuen was largely consistent with Q2 2018 as
drilling activity is reduced in the substantially developed main
production area of Chachahuen Sur. The Chachahuen operator, YPF, is
currently preparing to ramp up development activity in the Cerro
Morado Este portion of the block that is expected to increase
overall production from Chachahuen.
Drilling activity at Chachahuen Sur continues albeit at a lower
level with eleven new wells drilled during the third quarter (Q2
2018: 13), including two horizontal wells that are currently under
evaluation. In addition, YPF continues to selectively convert
certain producing wells to water injectors. As a result, overall
recoveries are expected to be greater over time due to improved
secondary recovery. This activity is part of the field wide
enhanced recovery efforts and is aimed at improving waterflood
conformance to ultimately increase the recovery factor from the
area. In addition, a total of twelve workovers were carried out
during this period at Chachahuen.
Going forward, development activity in the main producing
Chachahuen Sur field portion of the similarly named Chachahuen Sur
concession is expected to decrease as the area is now substantially
developed. Most of the future development will likely be focused on
the Centenario play in the Cerro Morado Este field portion of the
Chachahuen Sur concession.
Other Neuquina basin activity
Final seismic volumes have been delivered from the company's
recent seismic acquisition in the southern Puesto Rojas and La Brea
concessions. The company is currently interpreting the seismic
volumes and integrating the results of that work with existing
geologic data to identify new prospects and areas for development
in these blocks as well as determining a development strategy for
the areas.
The company drilled the Puesto Galdame.x-1 exploration well at
the Laguna el Loro concession in the period. This well was designed
to evaluate resource potential at the concession however the well
was determined to be unsuccessful and has subsequently been
abandoned as a dry hole. Abandoning the well resulted in a US$4.8
million exploration expense that has been recognised in the period.
The well at Laguna El Loro satisfied the licence commitments for
the initial exploration phase on the field.
An initial exploration well planned at Rio Atuel during the
period has been deferred because of permitting delays. The well
will likely now be delayed until early 2019. It is anticipated that
the initial exploration phase of the concession will be extended as
a result of delays experienced in the permitting process. The
initial exploration phase was originally due to expire in September
2018.
Austral basin
Production (boepd)
FY 2017 Q2 2018 Q3 2018
-------- --------
3,900 3,979 3,902
-------- --------
Production remained largely flat in the Austral basin due to a
combination of well downtime and natural decline at the company's
Santa Cruz assets that was offset by production gains from new
wells in the Tierra del Fuego area.
Santa Cruz Sur (non-operated)
Production (boepd)
FY 2017 Q2 2018 Q3 2018
-------- --------
3,180 3,147 2,966
-------- --------
Production decreases at Santa Cruz Sur were driven largely by
natural decline in the Chorillos area combined with downtime events
at the El Indio Oeste field that were not remediated in the period
as access to the wells is not possible in periods of seasonal
flooding.
Tierra del Fuego (non-operated)
Production (boepd)
FY 2017 Q2 2018 Q3 2018
-------- --------
720 832 936
-------- --------
Production increases in Tierra del Fuego were largely driven by
the new SM.x-1002 well that came online in August 2018 adding
approximately 1,877 boepd of gross production. Also during Q3 2018,
the newly drilled May.x-1 well was tested at 1,836 Mscfpd (312
boepd). The well is currently awaiting pipeline connection to
commence commercial production.
Three wells were drilled in the Tierra del Fuego area, two of
which were offset wells to the successful SM.x-1001 well and the
third being an exploration well. The first of these offset wells,
the SM.a-1002 came online with gross production of over 2,000
boepd. The well is currently producing at a reduced rate because of
offtake capacity constraints related to infrastructure. The
remaining two wells show promising log characteristics though will
likely need hydraulic stimulation to perform at economic rates.
This fracture activity is currently planned for 2019.
Austral basin activity plan
The continued development plans for both Santa Cruz Sur and
Tierra del Fuego remain under discussion between Phoenix and the
asset operator, ROCH.
Cuyana basin
Production (boepd)
FY 2017 Q2 2018 Q3 2018
-------- --------
2,136 1,867 1,685
-------- --------
Natural production decline continues at the relatively mature
Cuyana basin assets. The company actively manages the well stock to
counter natural decline where possible through workovers of
existing wells. The opportunity for further drilling in the mature
Cuyana concessions is limited.
Further workover activity is planned at both Tupungato and
Chañares Herrados through year end and into 2019.
Cuyana basin activity plan
Operational maintenance and minor facility upgrades took place
at the Cuyana basin assets during the quarter.
Additional information
Production summary
Basin/Concession Q3 '18 WI FY 2017 Q2 '18 Q3 '18
Gross BOE/D % Net BOE/D Net BOE/D Net BOE/D
--------------------------- ------------ ----- ---------- ---------- ----------
AUSTRAL 11,657 3,900 3,979 3,902
--------------------------- ------------ ----- ---------- ---------- ----------
Angostura (CA-14) 3,033 13% 50 252 383
Campo Bremen 770 70% 573 586 539
Chorillos 2,798 70% 2,103 2,055 1,959
Las Violetas 4,216 13% 646 559 532
Moy Aike 112 70% 105 114 78
Oceano 557 70% 399 391 390
Rio Cullen 171 13% 24 21 22
--------------------------- ------------ ----- ---------- ---------- ----------
CUYANA 1,793 2,136 1,867 1,685
--------------------------- ------------ ----- ---------- ---------- ----------
Atamisqui 316 100% 333 310 316
Chañares Herrados 487 78% 514 542 380
Puesto Pozo Cercado - 78% 274 - -
Refugio Tupungato 989 100% 1,014 1,014 989
GOLFO SAN JORGE 8 7
Sur Rio Deseado Este 16 25% 8 7 4
--------------------------- ------------ ----- ---------- ---------- ----------
NEUQUINA 13,638 5,026 4,588 4,157
--------------------------- ------------ ----- ---------- ---------- ----------
Cajon De Los Calallos 334 38% 159 110 125
Cerro Mollar Norte 83 100% 105 86 83
Cerro Mollar Oeste 88 100% 107 80 88
Chachahuen Sur 11,287 20% 1,949 2,375 2,257
Chachahuen Sur (Permiso) 267 20% 28 52 53
El Mmanzano Oeste (Agrio) - 100% 43 12 0
El Mmanzano Oeste (Resto) 48 40% 16 15 19
La Brea 54 100% 67 31 54
La Paloma - 100% - 1 -
Puesto Rojas 1,477 100% 2,485 1,821 1,477
Rio Atuel - 67% - - -
Vega Grande - 100% 68 6 -
--------------------------- ------------ ----- ---------- ---------- ----------
GRAND TOTAL 27,103 11,070 10,442 9,748
--------------------------- ------------ ----- ---------- ---------- ----------
- ENDS -
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