Prospex upbeat on enlargement of Suceava Concession

Prospex Oil and Gas said on Tuesday that it has been advised by the operator, Raffles Energy, that the National Agency for Mineral Resources (NAMR) has granted an enlargement of the exploration area of the EIV-1 Suceava Concession in north east Romania.

The AIM-traded firm said the additional area awarded covered a new gas prospect that was similar to the Bainet discovery, which Raffles and Prospex successfully drilled in November 2017 and started production in September last year.

Prospex’s wholly-owned subsidiary PXOG Massey held a 50% non-operated interest in the now-enlarged 984 square kilometre concession.

The additional area was located near the Bainet discovery, and extended the concession west towards the Bilca gas processing plant.

Importantly, the additional area contained a gas prospect which was described as “well defined” on 2D seismic with similar seismic attributes to the Bainet field.

That “Bainet look-alike” prospect lay at a similar depth, and was similarly positioned in relation to a fault, Prospex said.

Bainet-1 was drilled to a total depth of 600m, and encountered nine metres of reservoir with eight metres of net gas pay, consisting of a good quality Sarmatian sandstone reservoir, similar to that found in fields producing in and around the concession.

During testing, natural gas containing over 99% methane flowed at a rate of approximately 33,000 cubic metres per day through an 8mm choke.

The board said the Bainet-1 well had been connected to the Raffles-operated Bilca gas processing plant via a 2.2km flowline tie-back to the existing production infrastructure.

After a six-month period of production, Bainet's reservoir was currently performing in line with expectations.

Moving forward, it said the joint venture was assuming an average production rate of 15,000 cubic metres per day for 2019 budgeting purposes.

If a future discovery was made in the additional area, it would be likely put on production in a similar fashion to Bainet.

Prospex said it had agreed to reimburse Raffles a 50% share of the back costs incurred maturing the prospect, in amount of €125,000 net to Prospex and payable from production, after a well was drilled in the additional area.

A new exploration well would require permitting approvals for drilling, site preparation and civil engineering works and flowline connection to the gas processing facility, with the operator commencing work on putting the required permits in place.

“With the addition of a look-a-like Bainet structure, the enlargement of the Suceava Concession immediately increases the inventory of low cost, low risk gas prospects already mapped on the licence,” said Prospex non-executive chairman Bill Smith.

“With a less than a year cycle between drilling, completion and production start-up, the rapid development of Bainet demonstrates Romania's credentials as a good jurisdiction to invest in. Thanks to a positive regulatory backdrop and the 'can do attitude' of the experienced operator, small but very meaningful accumulations can be developed to generate attractive returns, if they are close to infrastructure and costs are controlled.”

Smith said based on the company’s €400,000 share of costs to drill and complete the Bainet-1 well as a producer and “excellent access” to existing infrastructure, the Bainet look-alike was one such opportunity which Prospex hoped would generate “attractive returns” for the partners.

“Further investment in our Romanian portfolio makes huge sense on both a standalone basis and part of prudent portfolio management, as we focus on generating multiple routes to quick, low risk cash flow.

“Combined with our 17% interest in the Podere Gallina licence onshore Italy, where we are working with our partners to bring the 13.3 bcf Selva Gas Field into production at a gross rate of 150,000 cubic metres / day in 2020, and our Tesorillo Project in Spain, where a technical work programme is underway to de-risk gross prospective resources of up to 2tcf of gas which includes an historic discovery, the value case for Prospex is clear.”

Smith said furthermore, the firm was continuing to evaluate additional opportunities that matched its investment criteria - specifically late stage European onshore projects with short timelines to value-generating activity, such as drilling.

“I look forward to providing further updates on our progress as we focus on monetising and growing our asset base and in the process generating significant value for our shareholders.”