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Highlands Natural Resources assets may be worth as much as US$600mln

Published: 07:48 09 Jan 2017 GMT

piles of cash, US dollars
Net present value is estimated between US$441 and US$600 mln for the three core assets

The assets held by Highlands Natural Resources Plc (LON:HNR) could be worth as much as US$600mln according to oil and gas experts.

Independent assessments of the group’s three main assets - the East Denver oil and gas project, the DT Ultravert well technology, and the Helios Two gas (plus helium) venture - tally to give a potential net present value between US$441.8mln and US$600.1mln.

Knowledge Reservoir LLC, a consultant, provided competent persons reports (CPR) for East Denver and Helios, while RPS has completed an independent opinion report (IOR) as assessment of DT Ultravert.

Highlands chief executive Robert Price said: “I am pleased to mark the beginning of 2017 with a positive update and refreshed independent analyses of Highlands' core projects. 

“We continue making steps towards our strategy of a mixed portfolio of production and development opportunities, with the weighting towards production. With this goal in mind, we have assembled three core projects that sit at the centre of our company. 

“The potential value available at each project is clear, and with refreshed independent assessments in hand we are now better positioned to secure financing and impactful relationships for their progression.”

DT Ultravert valued between US$78-135mln

In the IOR consultant RPS has upgraded DT Ultravert’s potential net present value range to between US$78-135mln, subject to further testing.

The technology is, according to Highlands, effective for re-fracking existing wells as well as a protective solution to prevent ‘bashing’ (a problem that impacts infill drilling programmes and high density oil and gas fields).

Highlights and its partners during 2017 gathered 75 days’ worth of production data which confirms the technologies usefulness against ‘bashing’.

“Testing has shown that DT Ultravert can be used to prevent well bashing and this result has impacted the market potential of this exciting technology,” Price added.

“Those positive test results have opened the door to additional potential parent well protection applications in several major shale basins across the United States, and our team continues to advance discussions with multiple potential hosts.”

Price also noted that a commercial deployment of DT Ultravert for re-fracking, originally planned for December, was delayed due to certain logistical constraints but added that the company is in talks with a number of operators and remains focussed on completing a commercial re-frack in the near term.

East Denver valued up to US$124mln

Knowledge Reservoir ascribes a value of US$23.4-30.1mln for six wells at the East Denver project, whereas it sees a larger 24 well development being worth between US$96.6mln and US$124.6mln.

Highlands highlights that this valuation is validation of its decision to extend its footprint in the area.

The company has, through a farm-in deal in Arapahoe County, expanded to have 3,840 contiguous acres in Colorado.

Potential of Helios Two is confirmed

As well as assessing East Denver, Knowledge Reservoir also reiterated the a potential value of US$341mln for the group’s Helios Two project.

The valuation is based on gases produced from Helios Two having 88% methane with 0.19% helium.

Highlands says it continues to work towards a definitive analyse of the Helios Two project.

“At Helios Two, we continue to advance the de-watering process via installation of new pumping and power generation equipment as indicated in the CPR,” Price said.

“This new equipment was installed in late December 2016, and has enabled the higher water discharge rates required to effectively de-water the Muddy Reservoir according to Highlands' internal modeling.

“Additionally, Highlands plans to drill a new deep-zone injection well to further facilitate de-watering by February 2017.  If de-watering succeeds, we hope to see increasing gas production within three to six months based on Highlands' internal modeling.”

Robert Price looks ahead to rest of 2017

The Highlands boss said: “Looking ahead to the rest of 2017, we believe that Highlands has the potential to be transformed in the event that any one of our three core projects achieves the economic and technical potential described by RPS in the updated reports released today. 

“Of course, we are working to achieve success on all three platforms.  As always, we will continue to update the market with material news as it becomes available."

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