Stellar Resources PLC Horse Hill Update (5289E)

TIDMSTG

RNS Number : 5289E

Stellar Resources PLC

19 July 2016

Stellar Resources plc

("Stellar" or the "Company")

Upgrade to Portland Oil in Place, Horse Hill-1 Discovery, Weald Basin

Stellar Resources PLC (LSE AIM: STG) announces that a new petrophysical analysis by Nutech, incorporating the findings of the successful Horse Hill-1 ("HH-1") flow test, demonstrates a threefold increase in calculated total oil in place (OIP) per square mile at the HH-1 well within the Upper Portland pay zone. As reported in May 2015 a total Horse Hill Portland P50 OIP of 21 Million Barrels ("MMbbl") was calculated utilising Nutech's petrophysical analyses. Nutech's May 2015 evaluation assigned a Portland OIP value of 7.7 MMbbl per square mile at the HH-1 well. Nutech's current evaluation upgrades the Portland OIP at HH-1 to 22.9 MMbbl per square mile, a 200% increase.

As previously announced in March, the final HH-1 Portland test flowed at a constrained stable dry oil rate of 323 barrels of oil per day ('bopd'). The Portland was produced at maximum pump capacity and showed no clear indication of depletion. It is likely that the rate can be further increased using a higher capacity downhole pump during the next planned test.

As previously stated by the Company, the calculated OIP per square mile should not be construed as recoverable resources, contingent or prospective resources or reserves.

HH-1 Discovery Well Location and Company Interest

The HH-1 well is located within onshore exploration Licence PEDL137, on the northern side of the Weald Basin near Gatwick Airport. PEDL246 lies adjacent to and immediately to the East of PEDL137. Stellar owns a 10% direct interest in HHDL. HHDL is a special purpose company that owns a 65% participating interest and operatorship of Licence PEDL137 and the adjacent Licence PEDL246 in the UK Weald Basin.

Background

Nutech's Report ("Report") details that the production of dry oil from the Portland, with little or no observed water production, required a rethink of the pre-flow test petrophysical model. Prior to the flow test, interpretations suggested that water would likely be produced along with oil, as is seen in Portland reservoirs in nearby producing oil fields. The revised model fully incorporates well test observations and measurements.

From a similar review of the petrophysical response within the Kimmeridge Limestones, the Report concludes that the well test results reinforce Nutech's and the Company's expectations regarding the significant volumes of OIP seen at the HH-1 well. As previously reported in April and June 2015, the overall Kimmeridge and Jurassic shale and limestone sequence is calculated to contain an OIP of 158 MMbbl per square mile at the HH-1 well and 9,245 MMbbl over the 55 square miles of the Licences.

Horse Hill Future Plans

The revised petrophysical model will be used to update Xodus' 2015 estimates of the total OIP contained within the mapped Horse Hill Portland oil accumulation. This will include an estimate of Contingent Resources net to the Company and will be reported in due course.

The Operator has also informed the Company that the flow test data analysis undertaken by Nutech and Xodus provides the necessary technical encouragement to engage Barton Wilmore Ltd, one of the UK's leading planning and environmental assessment practitioners, to prepare and submit a planning application to Surrey County Council ("SCC"), and to assist with obtaining necessary permissions from the Environment Agency ("EA"), for a significant appraisal programme at Horse Hill.

The applications will seek permission to conduct a programme consisting of the production flow testing of 3 Kimmeridge Limestone zones plus the overlying Portland over a total flow period of up to 360 days, plus two further appraisal/development wells and the acquisition of 3D seismic data.

A public consultation and engagement process related to the planning application is scheduled to take place, leading to an application to SCC and the EA.

Engineering studies to examine the range of possible flow rates from a planned horizontal sidetrack well are ongoing. Data to further calibrate these studies will be acquired during the further planned extended flow tests.

Qualified Person's Statement:

Stephen Sanderson, UK Oil & Gas Investment plc's Executive Chairman, 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.

For further information please contact:

 
 Stellar Resources plc:       [phone] 
 Alastair Clayton 
 
 Nominated Adviser:           [phone] 
 Cairn Financial Advisers 
  LLP 
 James Caithie / Sandy 
  Jamieson 
 
 Broker:                      [phone] 
 Optiva Securities Limited 
 Christian Dennis / Jeremy 
  King 
 
 Public Relations:            [phone] 
 Square1 Consulting 
 David Bick 
 

Glossary:

 
 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 
-------------  ------------------------------------------------ 
 contingent     contingent resources are those quantities 
  resources      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 may include, 
                 for example, projects for which there 
                 are currently no viable markets, or 
                 where commercial recovery is dependent 
                 on technology under development, or 
                 where evaluation of the accumulation 
                 is insufficient to clearly assess 
                 commerciality. Contingent Resources 
                 are further categorized in accordance 
                 with the level of certainty associated 
                 with the estimates and may be sub-classified 
                 based on project maturity and/or characterized 
                 by their economic status 
-------------  ------------------------------------------------ 
 flow test      a flow test or well test involves 
                 testing a well by flowing hydrocarbons 
                 to the 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 
-------------  ------------------------------------------------ 
 horizontal     the study of physical and chemical 
  well           rock properties and their interactions 
                 with fluids utilising electric logs, 
                 physical rock and fluid measurements 
-------------  ------------------------------------------------ 
 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. 
                 The Kimmeridge Limestones are effectively 
                 chalks being comprised of the remains 
                 of calcareous planktonic algae 
-------------  ------------------------------------------------ 
 oil field      an accumulation, pool or group of 
                 pools of oil in the subsurface. An 
                 oil field consists of a reservoir 
                 in a shape that will trap hydrocarbons 
                 and that is covered by an impermeable 
                 or sealing rock 
-------------  ------------------------------------------------ 
 oil in place   the quantity of oil or petroleum that 
                 is estimated to exist originally in 
                 naturally occurring accumulations 
                 before any extraction or production 
-------------  ------------------------------------------------ 
 petrophysics   the study of physical and chemical 
                 rock properties and their interactions 
                 with fluids utilising electric logs, 
                 physical rock and fluid measurements 
-------------  ------------------------------------------------ 
 reserves       those quantities of petroleum anticipated 
                 to be commercially recoverable by 
                 application of development projects 
                 to known accumulations from a given 
                 date forward under defined conditions; 
                 reserves must further satisfy four 
                 criteria: they must be discovered, 
                 recoverable, commercial and remaining 
                 (as of the evaluation date) based 
                 on the development project(s) applied; 
                 reserves are further categorized in 
                 accordance with the level of certainty 
                 associated with the estimates and 
                 may be sub-classified based on project 
                 maturity and/or characterised by development 
                 and production status 
-------------  ------------------------------------------------ 
 

About Barton Willmore

Barton Willmore is one the UK's largest planning practices, specialising in the planning, design and environmental assessment of energy projects from eleven regional o ces. Barton Willmore and their energy projects can be found be found on their website: www.bartonwillmore.co.uk/energy/

This information is provided by RNS

The company news service from the London Stock Exchange

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July 19, 2016 02:00 ET (06:00 GMT)