Prospex agrees to acquire minority interest in Tesorillo Project

Prospex Oil and Gas has agreed to acquire up to a 49.9% interest in the Tesorillo Project in southern Spain, it announced on Tuesday.

The AIM-traded firm said Tesorillo contains a known gas discovery, which a competent person's report undertaken by Netherland Sewell and Associates in 2015 estimated could hold gross unrisked prospective resources of 830 billion cubic feet of gas, with upside in excess of 2 Tcf.

It said the acquisition was in line with the company's strategy to build a portfolio of high-impact onshore and shallow offshore European opportunities, with short timelines to production.

This year, the company had already acquired interests in three onshore European projects and participated in the drilling of two new wells, both of which resulted in gas discoveries.

“The external sector of the Western Baetic Cordillera of Spain is possibly the final under-explored basin with conventional hydrocarbons potential in the country,” said Prospex exploration manager Carlos Venturini.

“Exploring this area will allow us to test gas bearing sandstone sequences which are already known, within a variant of the fore-deep play which we have successfully tested with two recent discoveries in Romania and in Italy.”

The Prospex board said Tesorillo comprised of two petroleum exploration licences - the Tesorillo and Ruedalabola permits - covering 38,000 hectares in a proven hydrocarbon region in the Cadiz Province of southern Spain.

Tesorillo contains the Almarchal-1 discovery well, which was drilled in 1956 by Spanish operator Valdebro and intersected a thick section of possible gas pay, including some zones which flowed gas to surface on testing and was located on a gravity and seismically delineated thrust ramp anticline, with closure area exceeding 70 square kilometres and multi-Tcf potential.

It said drill stem tests and log analysis confirmed 48m of gas pay from two Miocene Aljibe Formation sandstone intervals, with a further 492m of potential gas pay interpreted from logs but unconfirmed by testing.

Ruedalabola, meanwhile, contains the 1957 Puerto de Ojen-1 well, 15km to the east of Almarchal which displayed similar gas shows to Almarchal but could not be tested for mechanical reasons.

It described it as a “large resource”, with unrisked prospective resource of 830 Bcf with an upside in excess of 2 Tcf independently certified by NSAI in May 2015.

The acquisition was also said to have “excellent” access to infrastructure, with the project located 3.9 km from the North African Maghreb gas pipeline European landing point, providing access to high-priced European gas markets.

Prospex said it was pursuing a three stage acquisition process to buy up to 49.9% of Schuepbach Energy Espana, which has a 100% interest in Tesorillo, from Schuepbach Energy International.

The first stage would see it buy 2.50% for €48,750, effective immediately, with the second stage option to buy another 12.50% for €0.28m and the third stage option to buy a further 34.9% for €1.73m when drilling of a well is due to commence.

Prospex said its take up of the second and third stage options would be based on the results of an upcoming work programme planned by Schuepbach Energy Espana to further delineate and de-risk the project's prospectivity.

It said it envisaged that, on acquisition of the third tranche, a drill programme would have been agreed.

“Tesorillo offers the potential for very significant growth during 2018 and 2019 and caps a highly active and successful year for Prospex,” commented non-executive chairman Bill Smith.

“In line with our strategy we have acquired interests in three onshore European projects and participated in the drilling of two new wells, both of which have resulted in gas discoveries.

“As with our Suceava Concession in Romania and the Podere Gallina Exploration Permit in Italy, Tesorillo offers multiple development and appraisal gas opportunities.”

Smith said the company was confident its in-house experience and wide European industry network would provide invaluable knowledge in assisting SEE to take the “very exciting” project to the next stage and beyond.

“We expect to build on the momentum behind the Company in the year ahead,” Smith added.

“This will see the Bainet gas discovery brought on line in Romania; flow testing at the Podere Maiar-1d well in Italy and the commencement of a work programme at Tesorillo to de-risk further the prospectivity that has already been mapped.

“In parallel with this, we continue to evaluate additional projects that match our criteria, as we look to build a pipeline of value trigger events each of which have the potential to generate significant value for our shareholders and a re-rating of the company.”