Prospex Energy PLC Production Resumes at The Viura Gas Field

RNS Number : 5639J

Prospex Energy PLC

25 October 2024

 

25 October 2024

 

Prospex Energy plc

 

("Prospex Energy" or the "Company")

 

Production Resumes at The Viura Gas Field with Revenue Expected in November

 

Drilling of Viura-1B Well Exceeds Expectations with

 Encouraging Gas Shows and Several Potential Reservoir Formations Found

 

Prospex Energy plc (AIM:PXEN), the investment company focused on European gas and power projects, is pleased to announce that the Viura-1B development well which is being drilled by HEYCO Energy Iberia S.L. ("HEI") has successfully reached its revised targeted Total Depth ("TD").  TD of 4,500 metres which is ≈4,100 meters True Vertical Depth ("TVD"), was reached on 21 October 2024 in the 6-inch hole section of the bottom 450 metres of the well.  Drilling the Viura-1B well deeper to evaluate the Utrillas-B formation appears to have been a highly successful commercial decision, with good gas shows and several potential reservoir formations encountered in this previously undrilled section and with valuable new data acquired.

 

The Viura gas field is currently back on production with gas being flowed from the existing producing well Viura-1 ST3.  Production revenues from the Viura-1B well expected in November 2024.

 

Prospex owns 7.2365% of the Viura field through its ownership of 7.5% of HEI.  Prospex will receive 14.473% of the production income from the Viura gas field until payback of its initial capital investment from the acquisition in August 2024.

 

Overview

·    Drilling of the Viura-1B well commenced on 22 June 2024.  The revised TD was successfully reached on 21 October 2024 after the decision to deepen the well.

·    The well encountered the main Utrillas-A reservoir unit 50 metres high to prognosis and encountered the top reservoir with good quality reservoir rock with significant gas shows throughout the drilling of the main reservoir target and with gas-bearing formations extending some 30 metres deeper than nearby wells in the formation.

·    Deepening the well to appraise the Utrillas-B formation has resulted in the discovery of a new gas-bearing section beneath the proven and producing Utrillas-A formation in the Viura gas field.

·    Logging, flow testing and further detailed analysis of the large amount of data acquired from the well will be required before there can be a revision to the gas in place and recoverable reserves in Viura, although a material upgrade is anticipated.

·    The Viura-1B well will be connected to the existing gas processing facilities on site during the planned flow testing programme, thus immediately generating revenues, with production income expected in November 2024.

·    The Viura field recommenced production on 15 October 2024 from the existing well Viura‑1 ST3 to test the facilities following recent maintenance and upgrades ahead of the planned testing programme.  It has been flow tested at rates up to 17 MMcfd (0.48 MMscm/d).

 

Having reached TD, the operator has run wireline logging tools to evaluate the Utrillas-B formation prior to completing this interval with a 4½ inch liner.  A multistage completion will then be installed to allow an extensive flow testing programme to establish the flow rates from the different sections of the Utrillas-A prior to placing the well on long-term production.  The flow testing program for the Utrillas B section will be performed later in 2025.

 

The well has already exceeded pre-drill expectations for the main reservoir target the Utrillas-A and preliminary analysis indicates it has encountered a new gas bearing reservoir interval in the previously undrilled deeper Utrillas-B formation.

 

As already announced on 2 October 2024, the well encountered the main Utrillas-A reservoir unit 50 metres high to prognosis with significant gas shows throughout the drilling and coring of the main reservoir target.  Gas bearing reservoir was also encountered some 30 metres TVD below the deepest gas bearing intervals in nearby wells.  The deepening of the well to evaluate the Utrillas-B formation has also been successful.  Gas bearing reservoir formations have been encountered and analysis of the wireline log data to be acquired across this newly drilled formation will be carried out to assess the magnitude of the gas in place in this newly drilled formation.  Crucially, flow testing will be conducted to establish reservoir deliverability prior to bringing the well onto production.  Production facilities at the Viura gas plant, which is connected to the Spanish national grid network, will be able to process the gas produced during the testing phase for immediate export and sale.

 

The total extra cost of deepening the well to appraise the Utrillas-B section is on budget at a gross cost of €2.5 million.  Prospex has already paid its 15% share of the costs (€375,000) to deepen and complete the well.

 

Mark Routh, the CEO of Prospex, commented:

"I am extremely pleased to announce further successful results from the Viura-1B development well.  Although there is a great deal of analysis to be carried out to fully assess the implications of the well results to the recoverable reserves from the Viura field, this has transpired to be a highly successful project in which to be involved.

 

"Deepening the well to evaluate the previously undrilled formations below the proven, developed and producing Viura gas field has turned out to be an inspirational decision.  There are positive signs that a new gas bearing interval has been encountered with further analysis and importantly flow tests required to quantify the impact on recoverable reserves.

 

"It is also good news that the existing well on the Viura field successfully recommenced production last week with the produced gas being sold into the grid.

 

"I look forward to updating shareholders with results from the flow testing and further analysis as soon we have firm data to share."

 

 

Further Information

 

About Viura:

Prior to drilling the current Viura-1B well, the Viura producing gas field onshore in northern Spain had an estimated gross original gas in place of 211 Bcf (6 Bcm) and estimated reserves of 105 Bcf (3 Bcm).  To date, just 16 Bcf (0.5 Bcm) of gas has been produced from Viura meaning that the remaining reserves were estimated as 90 Bcf (2.5 Bcm) which is 6.5 Bcf (0.18 Bcm) net to Prospex.

 

In Spain there are only three producing onshore gas fields: El Romeral, Viura and Marismas.  Prospex currently owns a 49.9% share in El Romeral.  HEI currently has a 58.7964% interest in Viura.  The other participants in the ownership of the Viura Field Development are Sociedad de Hidrocarburos de Euskadi, S.A. ("SHESA") (owner of the 37.6901% of the Concession) and Oil and Gas Skills, S.A. (owner of the 3.5135% of the Concession).  On 5 April 2024, HEI entered into an asset purchase agreement with SHESA for the acquisition of the participation of SHESA in the Viura Field Development, which is subject to the fulfilment of certain conditions precedent.  Prospex through its 7.5% shareholding in HEI indirectly owns 7.2365% of the Viura concession, its reserves and the existing surface production facilities of the Viura gas plant, which is connected to the Spanish national grid.

 

HEI acquired its interest in the Viura gas field and became operator in 2022.  A new 3D seismic survey was acquired in 2013.  There is one well in production in the field Viura-1 ST3, which had been shut in until recently.  This well produces intermittently as water production is managed.  There is a workover planned on the existing well Viura-3 to reinstate it as a water injection disposal well.  HEI has permits in place to drill two wells, Viura-1B (currently being completed) and Viura-3B, scheduled to start in the second quarter of 2025.  Permits have been submitted to drill a third development well on the concession Viura-3A back-to-back with Viura-3B well in 2025.

 

The Viura-1B well commenced drilling operations on 22 June 2024.  The new investors (including Prospex) into HEI are funding 31.58% of the development costs to earn 15.79% ownership of HEI.  Prospex is funding 15% of the development costs of the HEI development programme comprising the current well in 2024 and the proposed 2025 two well drilling programme to earn 7.5% ownership of HEI and indirectly 7.2365% of the Viura asset.

 

Other new investors are funding 16.58% of the development costs to earn an 8.29% ownership in HEI.

The two new wells to be drilled from the first half of 2025 and completed in the second half of 2025 are to be funded from revenues from existing and new production from Viura or from new funds if required.  Viura-1B is expected to be generating revenues from production as early as November 2024 following the completion of the now extended testing programme.  The 2025 development programme is to be funded by future cash calls or from Phase 1 production or both.

 

There is a preferred pay-back mechanism for Prospex and all participants (including HEGI and new investors) of this new investment in HEI, the ("HEI Investors").  The HEI Investors will enjoy a 10% interest on their capital investments paid out from the existing and future production from Viura.  Until the HEI Investors have recovered their full capital commitments, plus the 10% preferred interest return, HEGI will not receive production income on their other 50% ownership of HEI over and above operating expenses and an allowance for Spanish taxes and royalties.  This means that Prospex will earn 14.473% of the revenues from the gas production from the Viura field until it has achieved payback of the £4.2 million capital investment it made in August 2024 to acquire the asset.  The gross cost (including the current Viura-1B well which has already been funded) of the three phase, three-year Viura development programme is estimated at a total of £55.4 million ($70.4 million).  HEGI is funding over 50% of that programme and the new HEI Investors are funding 31.58% through their interest in HEI which earns them an indirect 15.2368% ownership of the Viura asset (net 7.2365% to Prospex).

 

 

Qualified Person Signoff

In accordance with the AIM notice for Mining and Oil and Gas Companies, the Company discloses that Mark Routh, the CEO and a director of Prospex Energy plc has reviewed the technical information contained herein.  Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985.  He has over 40 years operating experience in the upstream oil and gas industry.  Mark Routh consents to the inclusion of the information in the form and context in which it appears.

 

For further information, please contact:

 

Mark Routh	Prospex Energy PLC	Tel: [phone]
Ritchie Balmer Rory Murphy David Asquith	Strand Hanson Limited (Nominated Adviser)	Tel: [phone]
Andrew Monk (Corporate Broking) Andrew Raca / Tommy Jackson (Corporate Finance)	VSA Capital Limited	Tel: [phone]
Ana Ribeiro / Charlotte Page	St Brides Partners Limited	Tel: [phone]

 

Further information on the Company can be found on its website at www.prospex.energy.

 

Notes

Prospex Energy PLC is an AIM quoted investment company focused on high impact onshore and shallow offshore European opportunities with short timelines to production.  The Company's strategy is to acquire undervalued projects with multiple, tangible value trigger points that can be realised within 12 months of acquisition and then applying low-cost re-evaluation techniques to identify and de-risk prospects.  The Company will rapidly scale up gas production in the short term to generate internal revenues that can then be deployed to develop the asset base and increase production further. 

 

The Company currently has three non-operated, revenue generating, onshore producing gas investments in Europe with low operational risk:

•     Selva Malvezzi, Italy (37% interest)

•     El Romeral gas to power plant, southern Spain (49.9% interest)

•     Viura Gas Field, northern Spain (7.24% interest)

 

Prospex also owns a 15% interest in the Tesorillo Exploration Permit in Southern Spain, with the option to increase to 49.9%.

 

Glossary:

scm                        Standard cubic metres

scm/d                   Standard cubic metres per day

MMscm               Million standard cubic metres

MMscm/d           Million standard cubic metres per day

Bcm                       Billion standard cubic metres

Bcf                          Billion standard cubic feet

MMscfd               million standard cubic feet per day

MWh                     Mega Watt hour

TTF                         The 'Title Transfer Facility' - a virtual trading point for natural gas in the Netherlands.

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