www.aurelianoil.com
Aurelian Oil & Gas PLC, was founded in December 2002, and is focused on the re-emerging Central and Eastern European oil and gas markets, the oldest producing oil province in the world.
Current projects span the region from Poland to Bulgaria, with production in Romania, a deep appraisal well drilled on a large structure in Poland in March 2007 to be developed with a further horizontal well to be drilled in 2010, together with exciting exploration prospects including projects in four countries, Romania (4 blocks), Slovakia (3 blocks), Bulgaria (2 blocks) and Poland (14 blocks). Aurelian is the operator in all of these except Bulgaria.
RNS Release - Siekierki Project Update & Strategic Review
Not for release, distribution or publication into or in the United States, Australia, Canada or Japan.
1 February 2012
Aurelian Oil & Gas PLC
("Aurelian" or "the
Company")
"Unlocking Value through Technology"
Siekierki Project Update and Strategic Review
· Over the past four months the Company has conducted a comprehensive review of its assets.
· Key conclusions:
o Siekierki is an attractive project.1 The initial problems are now well understood and a clear plan forward has been developed.
o The funded exploration portfolio offers significant upside.
o The cash position at the year-end 2011 was €63 mm which allows the Company to carry out its planned exploration and appraisal activities for the next 18 months.
o However, unlocking the full upside within the Company is likely to require additional technical and financial resources.
· The Board believes that the value of the Company, its skills and its future opportunities are not fully reflected in the current share price.
· The Board has therefore appointed Greenhill & Co to review the Company's strategic options.
· This review will assess a wide range of options for the Company including the sale of assets, or the merger or sale of the Company.
· The Company will provide further updates in due course.
John Conlin, Chairman commented:
"The Board remains committed to maximise value for shareholders. The Board's decision to explore strategic options is, we believe, the best way to achieve this goal. The business review has shown that Siekierki remains an attractive gas resource project and that our exploration portfolio has material upside.
"Aurelian has created an attractive platform in Central Europe comprising a diversified portfolio of operated exploration and appraisal licences which is very difficult to replicate. We also have strong working relationships and in-country operating experience which will have strategic attraction to many parties."
Rowen Bainbridge, CEO commented:
"The insight that we have gained on Siekierki is an important step forward. We now know a lot more about this project and have a more precise and phased appraisal plan to capture its value. This understanding could only have come from the appraisal programme the Company executed over the past two years. The Company is a pioneer in unconventional gas in Poland and our experience is consistent with that of our peers, in that tight gas and shale plays take time to unlock. The strategic hypothesis of unlocking value through technology in oil and gas exploration and production in an energy-hungry part of the world remains intact."
1 This is based on the Board's current view and is supported by AGR-TRACS. The value calculated on an EMV basis will be included in the Competent Person's Report ("CPR") due in March/April 2012.
Siekierki Update - a Large Gas Resource Play with Significant Upside
· The well tests on Siekierki have been completed and incorporated in a comprehensive technical and commercial review led by independent consultants AGR-TRACS.
· Key conclusions:
o Substantial gas initially in place ("GIIP") is present. A base case GIIP of 1.1 Tcf1 is now estimated in Block 207. This does not include gas potentially in Blocks 206 and 208 or the Krzesinki discovery. However, forecast production rates and recoveries have been lowered relative to the 2009 Gaffney, Cline & Associates CPR.
o The data acquired during the appraisal phase has significantly improved our characterisation and understanding of the Siekierki reservoir and a new reservoir model has now been established.
- The layered Rotliegendes sandstone sequence in Siekierki has a wide range of ambient porosity and permeability properties ranging from 6-18% and 0.02-30mD. The higher permeability layers will dominate well performance.
- The Krzesinki-1 well test result supports the new reservoir model, in terms of the presence of higher porosity zones within the gas legs of the Krzesinki and Siekierki fields, with an un-fracced well test producing 0.2mmscf/day (the first successful un-stimulated gas well flow test on Block 207 to date).
- The reservoir is not pervasively fractured and therefore the water production observed during each of the well tests is formation water from the matrix caused by relative permeability effects above the free water level.
o The Trzek-2 multi-fracced horizontal well had mechanical problems with the completion which reduced fracture effectiveness as had previously been disclosed.
o The Trzek-3 multi-fracced horizontal well was mechanically well executed with a good completion. However, the hydraulic fractures are not fully effective and the well bore is not contacting the high permeability zone encountered in the pilot hole.
o The combination of the reservoir's permeability to gas and water and the poor frac effectiveness explains why the Trzek-2 and Trzek-3 gas flow rates previously reported of 3mmscf/day and 3.2mmscf/day were significantly lower than had been expected.
o However, the multi-fracced horizontal wells utilised are the correct technology application for the field and significant operational lessons and insights have been learned.
o Multiple opportunities for significant improvement in initial well rates and recoveries have been identified for future wells.
· A revised development plan has been designed, comprising 32 wells recovering 296Bcf of gas, an average recovery of 9.25Bcf/well1. The value of Siekierki calculated on an EMV basis will be included in Aurelian's CPR covering both appraisal and exploration assets due in March/April 2012. However, following the comprehensive technical and commercial review supported by independent consultants AGR-TRACS and on the basis of the new reservoir model described above, the Board has determined that Siekierki is an attractive project.
· Aurelian will now seek to implement the next phase of the development plan2, which is likely to involve:
o Identifying and bringing in a farm-in partner.
o Putting Trzek-2 and 3 on longer term tests.
o Commercialising gas from these two wells via low pressure low methane tie-in and a "gas to wire" option as a smaller pilot development, with first gas expected at the end of 2013, requiring capital expenditure of approximately €12mm net to Aurelian.
o A fourth "proof of concept" well incorporating all of the learning to date, in an up dip area of the field is planned in 2013. A successful appraisal result will support the full field development plan for first gas in 2016.
· We have also identified further potential upside for Siekierki from a regional development as well as additional gas volumes once the prospect inventories on Blocks 206 and 208 have been delivered.
2 Subject to necessary approvals.
Exploration Programme Sharpened Further
· The Board has also reviewed the Company's exploration programme to ensure that its cash and technical resources are optimally applied. The key conclusions from the exploration review are:
Niebieszczany-1 well has discovered 50Bcf gross GIIP in two horizons and identified a 200Bcf gross GIIP resource play in the Krosno Formation.1 Two gas/condensate zones in the Krosno Formation, above the original primary target, were well tested with gas rates of 0.6 and 0.2mmscf/day plus condensate. A commercialisation plan is now being developed by the operator PGNiG.
o Planned well Sosna-1 within the Torzym reef oil play, targeting a prospect with 35mmbbls gross in-place, to be spud in March 2012.3
o Further geological and geophysical surveys planned to de-risk prospects identified on 2011 seismic data including Cybinka-Torzym, Slovakia and Romania (Brodina).
o High impact Carpathian well drilling string deferred to Q4 2012. Karpaty East holds significant upside, although now believed to be gas rather than oil. Company estimates mid-case 170Bcf gross recoverable resources across two large prospects.3
o Further wells pushed back to preserve capital, optionality and value in line with the strategic options review.
o All play-unlocking wells are being progressed for drilling.
o Licences with high working interests will be farmed out in the coming year, where appropriate, for example: Karpaty East and West, Slovakia and Romania.
o Commercialisation decision for the Krzesinki-1 discovery made on Poznan Block 207 will be made once the well tests have been completed in Q1 2012.
There will be a conference call this morning at 9.30am UK time for analysts and investors. Please call College Hill on 020 7457 2020 for the dial in details and go to the Company's website www.aurelianoil.com to download the presentation that will be discussed on the call.
The technical information and opinions contained in this announcement have been reviewed by Dr. John Smallwood BA (Cantab), MA, PhD (Cantab), FGS, C. Geol, Aurelian's Exploration Director who has 18 years of post-graduate experience in geoscience research, oil exploration and production. He has reviewed and consented to the inclusion herein of such technical information and opinions.
3 Aggregated Company mid-case estimate. Data to be audited for inclusion in the CPR due in March/April 2012.
Enquiries:
Aurelian | Rowen Bainbridge, CEO | 020 7245 4999 |
Greenhill & Co. LLP | Financial Adviser | 020 7198 7400 |
Brian Cassin | ||
Mark Bentley | ||
Ambrian Partners Limited | Nominated Adviser | 020 7634 4700 |
Richard Morrison | ||
Jen Boorer | ||
College Hill | Public Relations Adviser | 020 7457 2020 |
Nick Elwes | ||
Catherine Maitland | ||
Oriel Securities | Joint Broker | 020 7710 7600 |
David Arch | ||
Macquarie Capital (Europe) Limited | Joint Broker | 020 3037 2000 |
Paul Connolly | ||
John Dwyer |
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Securities laws
The distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement does not constitute an offer or an invitation to purchase or subscribe for any securities or a solicitation of an offer to buy any securities pursuant to this announcement or otherwise in any jurisdiction in which such offer or solicitation is unlawful."
Relevant securities in issue
In accordance with Rule 2.10 of the City Code on Takeovers and Mergers, the Company confirms that it has the following classes of relevant securities in issue:
Number of securities
| Type of securities
| ISIN Number
|
494,253,584 | ordinary shares | GB00B15S8C31 |
None of the Company's ordinary shares are held in treasury.
This information is provided by RNS
