Gunsynd PLC Horse Hill Update (1666W)

TIDMGUN

RNS Number : 1666W

Gunsynd PLC

07 February 2017

Gunsynd plc

("Gunsynd" or the "Company")

Upgrade to Portland Oil Resources, Horse Hill Oil Discovery, PEDL137, Weald Basin, UK

Highlights

-- Xodus calculate Portland sandstone P50 Oil in Place ("OIP") of 32 million barrels ("MMbbl"), a 53% increase from the 21 MMbbl previously reported prior to successful 2016 flow testing

   --      Gross recoverable Portland 2C Contingent Resources 1.5 MMbbl 

-- Base Case Portland initial oil-rate estimated at 350 barrels of oil per day ("bopd") per well

-- Ultimate recovery could be increased by a further 8-14% of OIP via early implementation of a water re-injection scheme. If successful, this could represent a 114%-440% addition to 2C recoverable resources, equating to an additional 1.7-6.6 MMbbl gross recoverable, or 0.5-2.1 MMbbl net to the Company

   --      Work plans now aimed towards Portland long-term production by end 2018 

Gunsynd plc (AIM: GUN) announces that a new Report by Xodus Group Ltd ("Xodus") calculates the Horse Hill Portland sandstone conventional oil accumulation to contain an OIP of 32 MMbbl, an increase of 53% from the previously reported 21 MMbbl of May 2015. The upgrade results from the incorporation of Nutech's revised petrophysics, as reported in July 2016. As previously stated by the Company, OIP should not be misconstrued as recoverable Contingent Resources or reserves, which are detailed below.

Gunsynd holds a 2% shareholding in HHDL, which in turn owns 65% of PEDL137 and PEDL246. Gunsynd's direct attributable interest in these Licences is therefore 1.3%.

In March 2016 HHDL reported the final Horse Hill-1 ("HH-1") Portland test flowed at a stable dry oil rate of 323 bopd, producing light, sweet, 35 API gravity crude. The Portland was produced at the rod-pump's maximum achievable rate and thus flow was constrained by the pump's mechanical capacity. The test data analyses show no clear indication of depletion.

As a result of further analysis of the Portland flow test data, plus a review of similar producing fields, Xodus now assess the gross recoverable Portland 2C Contingent resources at 1.5 MMbbl. Calculated OIP and resources reflect oil contained in the entire Portland structure, as penetrated by the HH-1 and Collendean Farm -1 wells.

The Contingent Resource volumes given are those estimated to be attributable to primary recovery from the Portland reservoir. Results utilise a base case of three wells, draining both the Horse Hill and Collendean Farm fault blocks, each well with an initial production rate of 350 bopd.

The report also details that, for a shallow but permeable reservoir such as the Portland, should a water re-injection scheme be undertaken to provide pressure support in the field's early productive life, it is reasonable to expect a material increment in overall oil recovery. The successful implementation of such a scheme is estimated to lead to the recovery of an additional 8-14% of OIP, equivalent to a further 1.7-6.6 MMbbl of gross recoverable oil.

A summary of the Report's results is shown in tables 1 and 2 below.

As previously reported in October 2016, HHDL submitted a planning application to Surrey County Council for an extensive HH-1 appraisal programme, including long-term production testing and a new deviated well, HH-2, designed to access the Portland in both the HH-1 and Collendean Farm-1 proven oil-bearing fault blocks.

Table 1, Portland Sandstone, gross discovered OIP MMbbl:

 
 Horse Hill Discovery    Low (P90)   Best (P50)   High (P10)   Mean 
----------------------  ----------  -----------  -----------  ----- 
 Portland OIP MMbbl        21.5         32.2         47.4      33.5 
----------------------  ----------  -----------  -----------  ----- 
 

Table 2, Portland Sandstone, gross and net to Gunsynd Contingent Resources mbbls:

 
 Horse Hill Portland Sandstone      Gross Field - 100%       Net to Gunsynd - 1.3% 
-------------------------------  -----------------------  -------------------------- 
 Resource Category                 1C      2C       3C       1C       2C        3C 
-------------------------------  -----  -------  -------  -------  --------  ------- 
 Recoverable Oil mbbls 
  (primary recovery only) (1)     592    1,498    3,629     7.7      19.5      47.2 
-------------------------------  -----  -------  -------  -------  --------  ------- 
 

(1) Xodus Report states recovery could likely be improved by a further 8-14% of OIP via an early water re-injection scheme

HH-1 Oil Discovery, Location and Company Interest

The HH-1 oil discovery well is located within onshore exploration Licence PEDL137, on the northern side of the Weald Basin near Gatwick Airport. HHDL owns a 65% interest in PEDL137 (as well as in PEDL246) and is the licence's operator.

Qualified Person's Statement:

Stephen Sanderson, who has over 35 years of relevant experience in the oil industry, has approved the information contained in this announcement. Mr Sanderson is a Fellow of the Geological Society of London and is an active member of the American Association of Petroleum Geologists.

This announcement contains inside information for the purposes of Article 7 of EU Regulation

596/2014.

The directors of Gunsynd accept responsibility for this announcement.

For further information please contact:

Gunsynd plc:

[phone]

Hamish Harris

Nominated Adviser/NEX Exchange Corporate Adviser:

[phone]

Cairn Financial Advisers LLP

James Caithie / Sandy Jamieson

Peterhouse Corporate Finance (Joint Broker)

[phone]

Lucy Williams

Glossary:

 
 1C                   denotes the low estimate scenario 
                       of Contingent Resources 
-------------------  ----------------------------------------------- 
 2C                   denotes the mid or best estimate 
                       scenario of Contingent Resources 
-------------------  ----------------------------------------------- 
 3C                   denotes the high estimate scenario 
                       of Contingent Resources 
-------------------  ----------------------------------------------- 
 Contingent           Contingent Resources are those 
  Resources            quantities of petroleum estimated, 
                       as of a given date, to be potentially 
                       recoverable from known accumulations, 
                       but the applied project(s) are 
                       not yet considered mature enough 
                       for commercial development due 
                       to one or more contingencies. Contingent 
                       Resources are further categorised 
                       in accordance with the level of 
                       certainty associated with the estimates 
                       and may be sub-classified based 
                       on project maturity and/or characterised 
                       by their economic status. 
-------------------  ----------------------------------------------- 
 degree API           a measure of the density of crude 
                       oil, as defined by the American 
                       Petroleum Institute 
-------------------  ----------------------------------------------- 
 discovery            a discovery is a petroleum accumulation 
                       for which one or several exploratory 
                       wells have established through 
                       testing, sampling and/or logging 
                       the existence of a significant 
                       quantity of potentially moveable 
                       hydrocarbons 
-------------------  ----------------------------------------------- 
 flow test            a flow test or well test involves 
                       testing a well by flowing hydrocarbons 
                       to surface, typically through a 
                       test separator. Key measured parameters 
                       are oil and gas flow rates, downhole 
                       pressure and surface pressure. 
                       The overall objective is to identify 
                       the well's capacity to produce 
                       hydrocarbons at a commercial flow 
                       rate 
-------------------  ----------------------------------------------- 
 limestone            a sedimentary rock predominantly 
                       composed of calcite (a crystalline 
                       mineral form of calcium carbonate) 
                       of organic, chemical or detrital 
                       origin. Minor amounts of dolomite, 
                       chert and clay are common in limestones. 
                       Chalk is a form of fine-grained 
                       limestone 
-------------------  ----------------------------------------------- 
 mean                 or expected value, is the probability-weighted 
                       average of all possible values 
                       and is a measure of the central 
                       tendency either of a probability 
                       distribution or of the random variable 
                       characterised by that distribution 
-------------------  ----------------------------------------------- 
 oil in place         oil in place or oil in the ground 
                       is the quantity of oil or petroleum 
                       that is estimated to exist originally 
                       in naturally occurring accumulations 
                       before any extraction or production 
-------------------  ----------------------------------------------- 
 P10 (high            a 10% probability that a stated 
  estimate)            volume will be equalled or exceeded 
-------------------  ----------------------------------------------- 
 P50 (best            a 50% probability that a stated 
  estimate)            volume will be equalled or exceeded 
-------------------  ----------------------------------------------- 

 P90 (low estimate)   a 90% probability that a stated 
                       volume will be equalled or exceeded 
-------------------  ----------------------------------------------- 
 petrophysics         the study of physical and chemical 
                       rock properties and their interactions 
                       with fluids utilising electric 
                       logs, physical rock and fluid measurements 
-------------------  ----------------------------------------------- 
 primary recovery     The first stage of hydrocarbon 
                       production, in which natural reservoir 
                       energy, such as gas drive, water 
                       drive or gravity drainage, displaces 
                       hydrocarbons from the reservoir, 
                       into the wellbore and up to surface. 
                       Initially, the reservoir pressure 
                       is considerably higher than the 
                       bottomhole pressure inside the 
                       wellbore. This high natural differential 
                       pressure drives hydrocarbons toward 
                       the well and up to surface. However, 
                       as the reservoir pressure declines 
                       because of production, so does 
                       the differential pressure. To reduce 
                       the bottomhole pressure or increase 
                       the differential pressure to increase 
                       hydrocarbon production, it is necessary 
                       to implement an artificial lift 
                       system, such as a rod pump, an 
                       electrical submersible pump or 
                       a gas-lift installation. Production 
                       using artificial lift is considered 
                       primary recovery. Primary recovery 
                       is also called primary production 
-------------------  ----------------------------------------------- 
 sandstone            a clastic sedimentary rock whose 
                       grains are predominantly sand-sized. 
                       The term is commonly used to imply 
                       consolidated sand or a rock made 
                       of predominantly quartz grains 
-------------------  ----------------------------------------------- 
 secondary            a second stage of hydrocarbon production 
  recovery             during which a fluid such as water 
                       or gas is injected or re-injected 
                       into the reservoir through injection 
                       wells located in rock that has 
                       fluid communication with production 
                       wells. The purpose of secondary 
                       recovery is to maintain reservoir 
                       pressure and to displace hydrocarbons 
                       toward the wellbore. The most common 
                       secondary recovery techniques are 
                       gas injection and water flooding. 
                       Normally, gas is injected into 
                       the gas cap and water is injected 
                       into the production zone to sweep 
                       oil from the reservoir 
-------------------  ----------------------------------------------- 
 water re-injection   a common form of secondary oil 
  or water flood       recovery in which water is injected 
                       or re-injected into the reservoir 
                       formation to maintain reservoir 
                       pressure and to displace oil towards 
                       producing wells 
-------------------  ----------------------------------------------- 
 

About Xodus

Xodus Group Ltd. are an oil and gas focussed energy consultancy with over 500 employees providing integrated subsurface and surface solutions to a global client base. Further information can be found on Xodus' website: www.xodusgroup.com

This information is provided by RNS

The company news service from the London Stock Exchange

END

DRLUGUPUPUPMGRQ

(END) Dow Jones Newswires

February 07, 2017 02:00 ET (07:00 GMT)