Update Re. Independent Evaluation of Hydrocarbons (2635K)

TIDMNGP

RNS Number : 2635K

Niche Group (The) PLC

13 July 2011

Embargoed: 0700hrs 13 July 2011

The Niche Group plc

("Niche" or the "Company")

Update Re. Independent Evaluation of Hydrocarbons

Further to the announcement of 6 July 2011, Niche, the AIM listed investment company with interests in gas exploration and development activities onshore Turkey, has received Operator approval for the publication of an Executive Summary of the first independent evaluation of the recoverable hydrocarbons (the "CPR") within Oman Resources Ltd's ("Oman Resouces") assets in Turkey. Niche holds loan notes convertible into a 35.7% shareholding in Oman.

The Executive Summary is available for viewing on the Documents section of the Company's website at. http://www.nichegroupplc.co.uk/documents.aspx

A summary appears below:

This report comprises an independent evaluation of the recoverable hydrocarbons for the interests in the AR/ARR/4077 licence in Konya and in the AR/ARR/4394, AR/ARR/4395 and AR/ARR/4396 licences in Hatay. The assets evaluated comprise development opportunities, exploration prospects and leads with prospective resources. The working interest that Oman Resources holds in the licences is 50%.

Oman Resources has farmed in to licences that are owned and operated by ARAR PETROL VE GAZ URETIM PAZARLAMA AS ("ARAR"), which has retained the remaining 50% interest. ARAR is a Turkish integrated upstream oil company, focused on exploration and early stage production, with more than 2 million acres under licence. Its strategy is to obtain and develop licences in proven hydrocarbon provinces with discoveries in Turkey that have until now been neglected, either because of a historic lack of focus on gas assets, or because of difficulty to commercialise. ARAR's organisation allows it to quickly move an asset from exploration to delivery of gas into the market.

The volumes reported in the summary tables are those within the licence attributable to the production share of Oman Resources. The individual prospect descriptions provide the gross whole field volumes and the volume distribution range for the resources for each opportunity. Where appropriate, gas resources have been converted to an oil equivalent using 5.8 Mscf = 1 boe.

Reserves and Resources

( )

 
             Reserves and Resources Net to Oman Resources 
--------------------------------------------------------------------- 
                       Proved + Probable 
                               2P              2C       Best Estimate 
--------------------  ------------------  -----------  -------------- 
                                           Contingent    Prospective 
 Volume Gas (Bscf)         Reserves         Resources     Resources 
--------------------  ------------------  -----------  -------------- 
    Hatay Licences           12.6              -            39.9 
--------------------  ------------------  -----------  -------------- 
    Konya Licence              -              57.3          52.2 
--------------------  ------------------  -----------  -------------- 
 Total Gas (Bscf)            12.6             57.3          92.2 
--------------------  ------------------  -----------  -------------- 
 Total Hydrocarbons 
  (MMboe)                     2.2             9.9           15.9 
--------------------  ------------------  -----------  -------------- 
 
 

Hatay, Turkey

The licences are based in the Iskenderun basin, formed during the late Tertiary and which is tectonically complex. A number of exploration wells have been drilled on the three blocks and numerous hydrocarbon shows have been seen. The main reservoir objectives are the early Pliocene Aktepe fluvio-deltaic sandstones, the Upper Miocene Upper Kizildere delta plain sandstones, the Middle Miocene Lower Kizildere pro-delta sandstones and the Middle Miocene Horu carbonates.

In block 4396, ARAR's Hamam-1 well encountered high quality gas in the Upper Kizildere formation in 2011 at a maximum flow rate of 6.8 MMscf per day and is currently test producing the gas and delivering this into the local market. The Yesiltepe-1 well, drilled in 2003 by Amity Oil, tested 97% methane gas in the Lower Kizildere Miocene sands at a rate of 1.7 MMscf per day. ARAR's interpretation of the seismic is reasonable and confirms earlier work done by Amity Oil, which shows a folded structural high elongated northeast-southwest and cut by transverse faults. The Yesiltepe and Hamam wells are in the southwest end of the structure, separated from the northeast end by a fault.

In block 4395, all historic exploration wells encountered gas and oil, but mainly due to use of inadequate techniques, none of these tested hydrocarbons at commercial rates. The main objectives are the Miocene Kizildere sandstones and the shallower Pliocene Aktepe sandstones. ARAR spudded the Kastal-1 well in December 2010, but drilling was suspended after a gas blow-out at 300 m. ARAR is finalising its testing of this well and intends to start test production. Drilling to the deeper target has been postponed. In block 4394, the Cumular-1 well drilled in 1989 into the Ayseler prospect, which is a shallow tilted fault block, encountered hydrocarbons in sandstones at the base of the Upper Kizildere. The well was not tested (as the target then was oil rather than gas) and is not classified as a discovery. ARAR spudded the Ayseler-1 well in December 2010 but drilling was suspended after the well reached a depth that was sufficient to fulfil licence obligations and the rig was moved to a higher priority location. Drilling of Ayseler-1 is planned to resume in Q4 2011.

The net reserves and un-risked prospective resources remaining as of 1st January 2011 attributed to Oman Resources in Hatay are shown in the following tables.

 
                   Net Reserves (Bscf) 
--------------------------------------------------------- 
 Asset                         Equity   1P     2P     3P 
----------------------------  -------  ----  -----  ----- 
     Licence AR/ARR/4396 
----------------------------  --------------------------- 
 H-1 segment, 
  Upper Kizildere reservoir     50%     1.9   9.2    19.9 
----------------------------  -------  ----  -----  ----- 
 Y-1 segment, 
  Basal Upper Kizildere 
  reservoir                     50%     0.9   3.4    6.9 
----------------------------  -------  ----  -----  ----- 
 Total Gas (Bscf)                       2.8   12.6   26.8 
-------------------------------------  ----  -----  ----- 
 Total Hydrocarbons (MMboe)             0.5   2.7    4.6 
-------------------------------------  ----  -----  ----- 
 
 
                  Net Prospective Resources (Bscf) 
-------------------------------------------------------------------- 
                                                           Chance 
 Asset                     Equity   Low    Best   High    of Success 
------------------------  -------  -----  -----  -----  ------------ 
   Licence AR/ARR/4394 
------------------------  ------------------------------------------ 
 Ayseler Prospect, 
  Upper Kizildere 
  reservoir                 50%     2.2    7.7    15.1       25% 
------------------------  -------  -----  -----  -----  ------------ 
   Licence AR/ARR/4395 
------------------------  ------------------------------------------ 
 Kastal area, 
  Aktepe reservoir          50%     0.4    1.8    3.9        36% 
------------------------  -------  -----  -----  -----  ------------ 
 Kastal area, 
  Upper Kizildere 
  reservoir                 50%     1.5    4.9    9.7        40% 
------------------------  -------  -----  -----  -----  ------------ 
 Kastal area, 
  Lower Kizildere 
  reservoir                 50%     1.0    3.2    6.2        40% 
------------------------  -------  -----  -----  -----  ------------ 
   Licence AR/ARR/4396 
------------------------  ------------------------------------------ 
 Hammam NE segment, 
  Upper Kizildere 
  reservoir                 50%     3.8    15.4   32.4       35% 
------------------------  -------  -----  -----  -----  ------------ 
 Yesiltepe NE segment, 
  Basal Upper Kizildere 
  reservoir                 50%     1.7    6.9    14.3       35% 
------------------------  -------  -----  -----  -----  ------------ 
 Total Gas (Bscf)                   10.7   39.9   81.5 
---------------------------------  -----  -----  -----  ------------ 
 Total Hydrocarbons (MMboe)         1.8    6.9    14.0 
---------------------------------  -----  -----  -----  ------------ 
 

Senergy has identified additional prospective resources above those mentioned and quantified above, including prospects in the Gokdere-1 structure, the Top Lower Kizildere structure around the Gokdere-5 well, the Kizildere structure around the Gokdere-6 well and leads north of Osmaniye. None of these have been further qualified or quantified due to current lack of data, but they all have gas shows with the Gokdere-5 well also recovering oil from Miocene sands and potential for oil form deeper levels.

Konya, Turkey

The 4077 licence is based in Central Anatolia in the Tuzgolu (Salt Lake) basin and is part of a broader set of ARAR licences in the basin. Exploration in the area started in the late 1950's. As the focus was on oil, the gas discoveries were not commercialised and there is currently no hydrocarbon production in the basin.

The basin is tectonically complex and has a salt layer in the Eocene. There is also evidence of volcanic activity in the Palaeocene. The main reservoir objectives are Basal Oligoscene Kochisar sandstones, Basal Eocene sandstones, Palaeocene Kirkkavak turbidite sandstones and Palaeocene Caldag Carbonates, of which the first two vary in thickness and may lack lateral continuity. Additional pay intervals were seen in the Yassipur in the Karapinar-2 well. The deeper Haymana sandstones are likely to extend into 4077 and tested oil in the Bezirci-1 well in block 4074 immediately North of block 4077.

The reservoirs in the Caldag and Kirkkavak horizons show a prominent structural high in the west controlled by north-south faults and a structural nose to the east, with west to east trending faults. Five wells have been drilled to date on block 4077: Karapinar-1, -2 and -3 and Gulhanim-1 and -2. Karapinar-3 missed the reservoir and all other wells have hit the east flank of the reservoir and encountered hydrocarbons, with Karapinar-2 located just south of a compartmentalising fault. The limitations in seismic and log data are reflected in the uncertainty in reservoir quality and hydrocarbon presence, particularly away from the closely spaced wells. Karapinar-2 reported a flow rate of 546 Mscf per day of good quality gas from basal Eocene sandstones. A full well test is expected from Gulhanim-2 by Q3 2011.

The un-risked net contingent and prospective resources for prospects attributed to Oman Resources in Konya are shown in the following tables.

 
                Net Contingent Resources (Bscf) 
-------------------------------------------------------------- 
 Asset                      Equity   1C     2C     3C     Risk 
-------------------------  -------  ----  -----  ------  ----- 
 G-1 segment, 
  Caldag Reservoir           50%     1.3   14.7   35.8    0.8 
-------------------------  -------  ----  -----  ------  ----- 
 G-1 segment, 
  Kirkkavak Reservoir        50%     0.3   5.7    13.8    0.8 
-------------------------  -------  ----  -----  ------  ----- 
 K-2 segment, 
  Kirkkavak Reservoir        50%     0.7   6.2    14.3    0.8 
-------------------------  -------  ----  -----  ------  ----- 
 G-1 segment, 
  Basal Eocene Reservoir     50%     1.1   11.1   25.7    0.8 
-------------------------  -------  ----  -----  ------  ----- 
 K-2 segment, 
  Basal Eocene Reservoir     50%     2.3   19.7   45.6    0.8 
-------------------------  -------  ----  -----  ------  ----- 
 Total Gas (Bscf)                    5.8   57.3   135.3 
----------------------------------  ----  -----  ------  ----- 
 Total Hydrocarbons (MMboe)          1.0   9.9    23.3 
----------------------------------  ----  -----  ------  ----- 
 
 
                  Net Prospective Resources (Bscf) 
------------------------------------------------------------------- 
                                                          Chance Of 
 Asset                      Equity   Low   Best   High     Success 
-------------------------  -------  ----  -----  ------  ---------- 
 K-2 segment, Caldag 
  Reservoir                  50%     1.0   12.1   29.5       40% 
-------------------------  -------  ----  -----  ------  ---------- 
 West & South segments, 
  Caldag Reservoir           50%     1.6   16.7   40.2       23% 
-------------------------  -------  ----  -----  ------  ---------- 
 West & South segments, 
  Kirkkavak Reservoir        50%     0.3   7.6    18.1       20% 
-------------------------  -------  ----  -----  ------  ---------- 
 West & South segments, 
  Basal Eocene Reservoir     50%     1.1   12.4   30.3       20% 
-------------------------  -------  ----  -----  ------  ---------- 
 G-2 area, Kochisar 
  Reservoir                  50%     0.5   3.5     7.9       17% 
-------------------------  -------  ----  -----  ------  ---------- 
 Total Gas (Bscf)                    4.6   52.2   125.9 
----------------------------------  ----  -----  ------  ---------- 
 Total Hydrocarbons (MMboe)          0.8   9.0    21.7 
----------------------------------  ----  -----  ------  ---------- 
 

Additional oil and gas prospects and leads have been identified in the Konya block, but these have not been quantified. This includes condensate from the Caldag in G-2, which has been produced, but for which yield could not be established, based on the information available. Prospective resources can be identified in the north-west and in the east of the block, but these cannot be quantified. Finally, there is deeper oil potential in the Haymana. The technically recoverable volumes presented in this report are based on a review of the independent interpretations conducted on the assets.

Reserves and resources are reported at estimated economic or technical cut-off rates agreed with Oman Resources and are otherwise derived according to the 2007 Petroleum Resources Management System prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers ("SPE") and reviewed and jointly sponsored by the World Petroleum Council ("WPC"), the American Association of Petroleum Geologists ("AAPG") and the Society of Petroleum Evaluation Engineers ("SPEE").

The development plans for the four exploration licences include additional seismic acquisition and processing on all blocks, exploration and development drilling and the development of local gas handling facilities, CNG bottling facilities and gas pipelines into the transmission network. Due to the shallowness of the reservoirs, the quality of the produced gas and the closeness of the transportation infrastructure, the cost to commercialise the gas is modest and relatively small resources can be commercially produced and marketed. Test production from Hamam-1 has been ongoing since April 2011 and ARAR has offered the produced gas into the local CNG market.

The Turkish gas market has substantially increased in the last decade. The vast majority of gas is imported with local production accounting for only 2% of consumption in 2010. The Turkish oil and gas infrastructure is adequately developed. Turkish wholesale gas prices, petroleum regulation and fiscal regime are attractive for local producers.

A cash flow analysis has been undertaken in respect of Oman Resources' net attributable resources. The Net Present Value (NPV) at 10% discount factor has been calculated for the Reserves and Contingent Resources, on the basis of the development plans and the related production profiles.

 
          Net Attributable NPV (10%) 
                Reserves in $MM 
---------------------------------------------- 
                              Proved, Probable 
 Proved   Proved & Probable      & Possible 
-------  ------------------  ----------------- 
  22.2          65.2               117.0 
-------  ------------------  ----------------- 
 
 
   Net Un-Risked Attributable NPV (10%) 
        Contingent Resources in $MM 
----------------------------------------- 
    1C            2C              3C 
----------  --------------  ------------- 
    9.1          119.5          341.8 
----------  --------------  ------------- 
 

Furthermore, the EMV for the 1C Contingent Resources is $4.3MM and for the 2C is $92.6MM.

An NPV per Mscf value has been applied to the quantified Prospective Resources, resulting in an un-risked NPV as per the table below.

 
    Net Un-Risked Attributable NPV (10%) 
            Prospective Resources 
-------------------------------------------- 
 NPV ($MM)         Low      Medium     High 
---------------  -------  ---------  ------- 
 Konya             8.7       99.3     239.2 
---------------  -------  ---------  ------- 
 Hatay             42.9     159.7     325.8 
---------------  -------  ---------  ------- 
 Total $MM         51.6     259.0     565.0 
---------------  -------  ---------  ------- 
 

Enquiries:

The Niche Group plc

Nigel Little or Alistair Stobie

Tel. [phone]

M: Communications

Patrick d'Ancona or Ben Simons

Tel. [phone]

Daniel Stewart & Co. Plc - Nominated Advisor and Joint Broker

Oliver Rigby

Tel. [phone]

Canaccord Genuity - Joint Broker

Charles Berkeley / Henry Fitzgerald-O'Connor

Tel: [phone]

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