Phoenix Global Resources plc Q1 Operational Update and Outlook

 
TIDMPGR 
 
 

12 June 2018

Phoenix Global Resources plc

("Phoenix" or the "Company")

Q1 Operational Update and Outlook

Phoenix Global Resources plc (AIM: PGR; BCBA: PGR) is an upstream oil and gas company offering its investors an opportunity to invest directly into Argentina's Vaca Muerta shale formation and other unconventional resources.

Phoenix is pleased to announce its Q1 operational update and outline an activity plan for the months ahead.

Highlights - year to date activity

 
 
    -- Average Q1 production of 10,749 boepd, consistent with full year 2017 

production

 
    -- Average realised oil price of US$59.84 per barrel 
 
    -- Operating costs of US$17.10 per barrel of oil equivalent 
 
    -- 2P reserves of 57.2 MMboe as at 31 December 2017 based on an 

independent reserve report by Gaffney Cline

 
    -- Completed new 3D seismic acquisition survey over 59,000 acres of south 

Puesto Rojas and La Brea

 
    -- Working interest in two of the Company's core Vaca Muerta areas, Mata 

Mora and Corralera, increased from 27% to 90% and Phoenix has become

the operator

 
    -- Permitting applications started under new unconventional oil and gas 

decree in Mendoza province to enable unconventional completion in the

Puesto Rojas core Vaca Muerta area

 
    -- Funding secured to support an accelerated activity plan in 2018; 

Mercuria has converted US$100 million of debt into new Phoenix shares

at 37 pence per share and provided a new convertible revolving credit

facility of US$160 million, securing an additional US$100 million of

capital for Phoenix

Highlights - financial position (unaudited)

 
 
    -- Revenues of US$47.0 million and EBITDAX of US$14.4 million in Q1 
 
    -- Capital expenditure of US$20.4 million in Q1 
 
    -- Net debt of US$84.4 million at 31 March 2018 
 
    -- Available cash and undrawn debt facilities of US$100 million at 31 

March 2018

 
    -- Whilst the Board continues to review the timing of a possible step up 

to the main market of the London Stock Exchange, it is unlikely to

happen in 2018

Highlights - outlook

 
 
    -- Two unconventional horizontal wells to be drilled in the Mata Mora 

area in Q3 2018 with completion scheduled for Q4

 
    -- Up to nine unconventional wells planned in the Puesto Rojas area, 

including one horizontal well in Q4

 
    -- Up to six further operated wells at Laguna el Loro, La Paloma, La Brea 

and Rio Atuel

 
    -- Participating in approximately 63 conventional production wells at 

Chachahuen, of which eight are horizontal, and up to seven

conventional production wells in the Austral basin to maintain

conventional production

Anuj Sharma, CEO said:

"Year to date we have made great progress in securing key unconventional acreage and operatorship positions giving us control over the work programmes and capital spend.

Looking forward we have an exciting 2018 drilling campaign, focused on the appraisal of Phoenix's significant unconventional Vaca Muerta acreage at Puesto Rojas and Mata Mora, including our first horizontal wells."

For further information, please contact:

 
Phoenix Global Resources plc    Anuj Sharma, CEO    T: [phone] 
                                Philip Wolfe, CFO   T: [phone] 
Stockdale Securities            Antonio Bossi       T: [phone] 
                                Ed Thomas 
Panmure Gordon                  Adam James          T: [phone] 
                                Atholl Tweedie 
Camarco                         Billy Clegg         T: [phone] 
                                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 plc (AIM: PGR; BCBA: PGR) is an upstream oil and gas company offering its investors an opportunity to invest directly into Argentina's Vaca Muerta shale formation and other unconventional resources. The Vaca Muerta is the only producing shale outside of the US and has attracted significant major entrants including Total, BP, Chevron, ExxonMobil, Qatar Petroleum, Petronas, Shell and Equinor. The Company has 560,000 net Vaca Muerta acres covering approximately 7.5% of the formation, with three core Vaca Muerta areas (Puesto Rojas, Mata Mora and Corralera). The Company's unconventional acreage is underpinned by 57.2 MMboe conventional proven and probable reserves and 11,070 boepd of production in 2017. The Company's strategy is to invest in drilling activity in its Vaca Muerta acreage to increase resources, reserves and production and is well capitalised and of a scale to do so.

The Company's website is www.phoenixglobalresources.com

Q1 2018 production

Average total daily production volumes in Q1 2018 compared to full year 2017 and Q4 2017 were as follows:

 
Production (boepd) 
FY 2017    Q4 2017   Q1 2018 
11,070     11,537    10,749* 
 
 

* Excludes Puesto Pozo Cercado, relinquished August 2017

Daily production volumes in Q1 2018 were largely consistent with those for full year 2017 with production gains at both Chachahuen and Angostura. These gains were offset by modest decline at Puesto Rojas where the focus of 2018 activity has been on the preparation for the upcoming unconventional drilling and completions campaign. In addition, the Puesto Pozo Cercado concession was relinquished in August resulting in a loss of 274 bpd in Q1 2018 compared to 2017. Average operating costs per barrel of oil equivalent was US$17.10, and average realised oil price was US$59.84 per barrel.

Neuquina basin

 
Production (boepd) 
FY 2017    Q4 2017   Q1 2018 
5,026      5,558     5,033 
 
 

Puesto Rojas

 
Production (boepd) 
FY 2017    Q4 2017   Q1 2018 
2,697      2,900     2,401 
 
 

The Company's focus at Puesto Rojas in the year to date has been on the planned drilling which has now started and the completions campaign due to commence at the end of June 2018. The Cerro Pencal vertical well, which was drilled as part of the last campaign in September 2016, continues to perform well with production at an average rate of approximately 150 bopd in Q1 2018, giving further encouragement ahead of the upcoming campaign. In addition, the Cerro del Medio well which was recompleted in the Agrio formation in August 2017 has produced at an average rate of approximately 400 bopd in Q1 2018.

In further preparation for the campaign, two idle wells have been prepared for use as water injectors while a further two existing idle wells, previously used for conventional production, have been prepared for unconventional recompletion in the Tight Agrio and Vaca Muerta formations.

Cerro Pencal

At Cerro Pencal, work has focused on increasing production from conventional wells with further upgrade work planned for 2018. The Company continues to seek a solution to emulsion issues encountered following the drilling and completion of wells in 2017, which were completed in Vaca Muerta using a new second generation hydraulic fracture design that aimed to produce a larger fracture surface area.

Remediation activity is focused initially on the CP-1017 vertical well that continues to produce from the Vaca Muerta formation. The well is one of four drilled and completed in a thicker horizon using a new fracture design which appears to have been successful in thinner horizons.

Chachahuen

 
Production (boepd) 
FY 2017    Q4 2017   Q1 2018 
1,976      2,335     2,377 
 
 

Production volumes continue to steadily increase at Chachahuen as the area is progressively drilled out and developed by the operator, YPF. In Q1 2018, 12 new wells were drilled including four horizontal wells in line with YPF's development plan for the asset. Two of the new wells are in the exploration portion of the Chachahuen Sur concession, potentially adding a new area for reserves growth should this area be found to be economic.

Austral basin

 
Production (boepd) 
FY 2017    Q4 2017   Q1 2018 
3,900      3,933     3,923 
 
 

Total production volumes were stable period on period in the Austral basin.

Santa Cruz Sur

 
Production (boepd) 
FY 2017    Q4 2017   Q1 2018 
3,180      3,131     3,092 
 
 

Production continues in line with expectations following the completion of a well in the Chorrillos block in Q1 2018 using a new hydraulic fracture design. Results are still being evaluated with the fracture design expected to reduce previous production variability.

Tierra del Fuego

 
Production (boepd) 
FY 2017    Q4 2017   Q1 2018 
720        802       831 
 
 

The increase in production from the Tierra del Fuego area in Q1 2018 is related to the successful San Martin.x-1 well in the Angostura concession.

Cuyana basin

 
Production (boepd) 
FY 2017    Q4 2017   Q1 2018 
2,136      2,038     1,786 
 
 

There was limited new activity in the Cuyana basin in the period with production from the Company's conventional assets remaining relatively consistent despite the relinquishment of the Puesto Pozo Cercados concession in 2017.

2018 outlook and activity by basin

Neuquina basin

At the Puesto Rojas and La Brea concessions the focus has been on the completion of the new 3D seismic survey covering 59,000 acres in the south of Puesto Rojas and part of La Brea, that will be used to appraise the resource potential and to identify targets for future drilling programmes. The acquisition of seismic data was completed in April 2018, the analysis and interpretation of the data is underway, with completion expected in July/August. The Company anticipates finding similar structures in these areas to those found and developed by Phoenix in the Cerro Pencal area to the north of the Puesto Rojas block.

At present, Phoenix has seven wells in Puesto Rojas awaiting unconventional completions, two of these wells were drilled in Q2 of this year. Subject to grant of the unconventional oil and gas permit, the Company anticipates commencing this completion campaign shortly.

The Company plans to drill a total of ten wells, including one horizontal well, in the Puesto Rojas area in 2018. Eight of the vertical wells will target the unconventional Vaca Muerta and Tight Agrio formations. In Q4 2018, we plan to commence our first horizontal unconventional well in the area targeting the Vaca Muerta/Tight Agrio on the Puesto Rojas concession. This will be significant in demonstrating the large-scale development potential of the unconventional resources in this area. The remaining well is a conventional vertical well targeting the Chachao and conventional Agrio formations.

In Q1 2018, Phoenix increased its working interest in two of the Company's core Vaca Muerta areas Mata Mora and Corralera from 27% to 90% and the Company has become the operator. The Company is in discussions with Integra Oil & Gas regarding compensation to be paid for their non-participation in the licences.

At Mata Mora the Company plans to drill its first horizontal wells on the concession in Q3. The Mata Mora concession is adjacent to one of the most prolific Vaca Muerta areas currently in production. The Company plans to drill two horizontal wells on the block as part of the upcoming campaign, which are intended to confirm the potential of the Mata Mora concession for a large scale unconventional development and reduce development costs on a per barrel basis.

On the Rio Atuel concession, one conventional exploration well is planned in furtherance of the licence commitments for the block. The Company increased its interest in the Rio Atuel block and assumed operatorship of the area in October 2017. Rio Atuel is contiguous with the Company's Puesto Rojas area concessions.

On the La Paloma, Cerro Alquitran, and La Brea concessions, three wells are planned to be drilled in the second half of the year.

One new exploration well will be drilled at the Laguna el Loro concession in June 2018, in accordance with the investment commitment associated with the concession.

At Chachahuen, there are now 63 new wells planned in 2018, of which eight are horizontal.

Austral basin

Together with its partner, ROCH S.A., the Company plans to drill three new development wells and undertake seven workovers of existing wells aimed at enhancing production in the Santa Cruz area.

As a result of the successful San Martin.x-1 well, two offset wells are planned to be drilled in 2018, with potential for further development depending on the results of these wells. An additional exploration well is also planned in the Tierra del Fuego area.

Two additional wells are planned in the Chorrillos block targeting the Tobifera formation using a new fracture design.

Cuyana basin

In the Atamisqui area, the Company is evaluating the most appropriate completion technique for the TB.x-1002 well drilled in late 2017.

Workover activities are planned at both Tupungato and Chañares Herrados aimed at arresting the natural decline curve.

Additional information

Production summary

 
Basin/concession   Q1 2018Gross  Workinginterest  Q1 2018WI boepd  2017WI boepd 
                   boepd         (WI) 
Neuquina 
basin 
Cajon De           348           38%              130              159 
Los 
Caballos 
Cerro              102           100%             102              105 
Mollar 
Norte 
Cerro              98            100%             98               107 
Mollar 
Oeste 
Chachahuen         11,661        20%              2,332            1,949 
Sur 
Chachahuen         223           20%              45               28 
Sur 
(Permiso) 
El Manzano         33            100%             33               43 
Oeste 
(Agrio) 
El Manzano         43            40%              17               16 
Oeste 
(Resto) 
La Brea            29            100%             29               67 
La Paloma          2             100%             2                - 
Puesto             2,202         100%             2,202            2,485 
Rojas 
Rio Atuel          0             67%              -                - 
Vega Grande        44            100%             44               68 
Austral 
basin 
Angostura          1,910         13%              241              50 
(CA-14) 
Campo              748           70%              524              573 
Bremen 
Chorrillos         2,910         70%              2,037            2,103 
Las                4,546         13%              574              646 
Violetas 
Moy Aike           160           70%              112              105 
Oceano             591           70%              414              399 
Rio Cullen         175           13%              22               24 
Cuyana 
basin 
Chañares           535           78%              417              514 
Herrados 
Atamisqui          325           100%             325              333 
Puesto Pozo        346           0%               -                274 
Cercado 
Refugio            1,043         100%             1,043            1,014 
Tupungato 
San Jorge 
basin 
Sur                32            25%              8                8 
Rio Deseado 
Este 
Total              27,760                         10,749           11,070 
 
 

- ENDS -

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June 12, 2018 02:00 ET (06:00 GMT)