San Leon Energy PLC Rawicz Commercial Gas Discovery (7803F)

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RNS Number : 7803F

San Leon Energy PLC

25 February 2015

25 February 2015

San Leon Energy plc

Rawicz Commercial Gas Discovery

San Leon Energy plc ("the Company" or "San Leon"), the AIM listed company focused on oil and gas exploration in Europe and North Africa, announces highly positive well test results for Rawicz-12, which the Company expects will form its first commercial gas discovery.

The Rawicz-12 appraisal well, located in south-western Poland, commenced flow testing on 5 February 2015 and has to date flowed at an increasing rate of up to 4.1 mmscf (million standard cubic feet) per day. No significant amounts of water have been encountered and gas quality matches expectations. Well productivity, gas production rate and surface flowing pressure continually increased during the long high-rate flow period.

The Company anticipates that an additional three to five wells will be drilled to develop the field, with the second well on Rawicz already in planning and being at no up-front cost to the Company. Gas prices in Poland are amongst the highest in Europe.

Rawicz-12 Well Testing Details

The Rawicz-12 appraisal well, drilled to appraise the previously-discovered, unproduced Rawicz gas field, was opened up to flow on 5 February 2015. Since then, apart from a short pressure build-up performed to gain technical data, the well has been continuously flowed to flare.

The well flow rate and flowing wellhead pressure steadily increased (indicating a progressive clean-up of the well) and by the morning of 16 February 2015 the gas production rate was approximately 4.1 mmscf/d, and increasing, at a flowing wellhead pressure of 205 psig (pounds per square inch) on a fixed choke of 80/64". The reservoir volume tested is determined largely by the length of the flow period, and is relatively insensitive to flow rate. Therefore on 16 February 2015, and with flow rate and pressure still increasing, the decision was taken in conjunction with Baker Hughes (the well testing advisors) to choke the well back to limit the flaring of gas for the remainder of the flow period. It should be stressed that the choking back of the well was solely to reduce wasted reserves.

No material water has been produced, and no hydrogen sulphide gas (H(2) S) has been recorded. Gas quality matches expectations and samples from previous wells in the field, at around 70% methane.

Preliminary evaluation of the data received so far indicates a permeability to gas of around 2mD, confirming the success case assumption that the field can be developed as a "conventional" resource.

The process of cleaning up of the well involves the removal of reservoir "skin" from the drilling and completion process. Skin is an engineering measure of how much the rock near the wellbore is affected by that process, with higher values indicating more restriction to production. The skin value is currently estimated to be around 7 - a relatively high figure - although flowing the well has already significantly reduced it to 7 from initial values. Calculations suggest that a much lower skin factor could increase the gas flow rate at these flowing conditions by around a half. Such a material flow rate upside could be achieved under several scenarios whereby the skin is reduced or bypassed, including:

   1)   Continued cleaning up of the well 

2) Performing stimulation (deep penetrating perforating, or hydraulic fracture) on the well to bypass remaining skin as much as possible

   3)   Reducing skin in future wells through modification of the drilling and completion programme. 

Rawicz-12 has been flowed only over the upper half of the gas-bearing interval, in order to minimise water production during the test. The absence of water production could enable future wells to be completed to a greater depth (where water saturation increases), increasing the flowing interval thickness and therefore the gas production rate. The existing well is vertical through the reservoir, meaning that deviated or horizontal wells during a development could be used to target still higher production rates.

It is expected that the well will complete its flow testing on 28 February 2015, following which pressure build-up data will be acquired for several weeks. This data measures the shut-in pressure response of the well, enabling reservoir characteristics such as permeability and volumetrics to be refined.

The Rawicz project is operated by Palomar Natural Resources ("Palomar") with 65% equity, and San Leon has no up-front drilling costs for its 35% equity share of the first two wells.

Oisin Fanning, San Leon Executive Chairman, commented:

"This is the well we have been waiting for - a significant gas discovery in one of the highest-priced gas markets in Europe. The Rawicz field has existing gas infrastructure nearby and a development feasibility project has already been completed.

This well is transformational for the Company, a step towards energy independence for Poland, and the first of what we anticipate will be a series of such wells for San Leon in the Rawicz field and elsewhere in Poland. These results are gratifying for the management and staff of San Leon Energy and are expected to be beneficial for our shareholders. I would like to thank our investors for their patience, and congratulate the on-site team for a job well done. We look forward to updating the market on the full interpreted results of Rawicz-12, and the next steps for the Rawicz field."

Joel Price, San Leon Chief Operating Officer, commented:

"The preliminary results of the well test are extremely encouraging, showing good permeability to gas and no water production. The data quality is high, as downhole shut in is being used (improving the ability to interpret pressure build up data in a gas well), and this gives confidence in the technical interpretation so far. The high flow rate of over 4 mmscf per day has been achieved even in the presence of what is believed to be a significant (and reducing) remaining reservoir skin, and without flowing the lower part of the reservoir, highlighting the flow rate upside in Rawicz. Once the full test and the final pressure build-up data have been acquired, the interpretation will be completed and will be used as input to defining the next steps for the Rawicz field."

Qualified person

Joel Price, who has reviewed this update, has 20 years' experience in the oil & gas industry and is a member of the Society of Petroleum Engineers. He holds a BA in Natural Sciences from Cambridge University, an MEng from Heriot-Watt University, and an MBA from Durham University. Joel is Chief Operating Officer for San Leon Energy and is based in San Leon's London office.

For further information contact:

 
 San Leon Energy plc 
  Oisin Fanning, Executive 
  Chairman                      [phone] 
 finnCap Ltd 
  Corporate Finance 
  Matt Goode 
  Christopher Raggett 
  Corporate Broking             [phone] 
  Joanna Weaving                 0500 
 Brandon Hill Capital 
  Oliver Stansfield             [phone] 
  Jonathan Evans                 5000 
 Macquarie Capital (Europe) 
  Limited 
  Jon Fitzpatrick               [phone] 
  Nicholas Harland               2000 
 Westhouse Securities Ltd 
  Nominated Adviser 
  Richard Johnson               [phone] 
  Antonio Bossi                  6100 
 Vigo Communications 
  Financial Public Relations 
  Chris McMahon                 [phone] 
  Alexandra Roper                9572 
 Plunkett Public Relations 
  Sharon Plunkett               [phone] 
 

www.sanleonenergy.com

This information is provided by RNS

The company news service from the London Stock Exchange

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