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Mosman Oil & Gas - Operations Update

RNS Number : 7460M
Mosman Oil and Gas Limited
13 May 2020
 

 

13 May 2020

 

 

Mosman Oil and Gas Limited

("Mosman" or the "Company")

 

 Operations Update

 

 

Mosman Oil and Gas Limited (AIM: MSMN) the oil exploration, development and production company, provides an operational update.

 

Global Events and Corporate Review

 

As previously stated, Mosman's business is not immune to the recent exceptional external events including Covid-19 and the fluctuating oil price.

 

In March, the Board concluded its review of all aspects of its operations and Mosman can now confirm that the cost reductions detailed in the announcement of 24 March 2020 have now been implemented. Production continues with an emphasis on margins rather than volumes.

 

Growth opportunities including Stanley and Greater Stanley in Texas are being retained at minimum cost.

 

Business Plan, Assets Sales and Cost Reductions

 

As announced on 11 May 2020, Mosman has signed a Farm-Out of EPA 155 in Central Australia. EP 145 is currently on hold due to the impact of the Covid-19 pandemic and an application has been made to suspend activities and extend the licence term.

 

Mosman continues to pursue its refocussed corporate strategy and as part of this Mosman is looking at options to sell its Welch Project in Texas, on the condition that a suitable price can be achieved. Proceeds will be allocated to fund projects with near term growth including Stanley and Greater Stanley.

 

Production Operations

 

1.  Production continues at Stanley.  Current flow rates are approximately 20% lower than the average daily production previously announced for the 6 month period ended 31 December 2019.

 

The Operator has advised that in their opinion: "We believe the greatest impact will be in the monthly oil price we receive in May. In response we have created on-lease temporary oil storage using rented frac tanks, allowing us to continue to produce the wells while mitigating adverse near-term pricing."

 

The tanks add circa 5,000 Bbls of storage and the additional tankage gives the Operator the option of exercising some control over the timing of sales, with the objective of obtaining a better sales price, albeit deferring cash flow.

 

The Operator also has advised that in their opinion: "Regarding operating costs, many of the projects that we have completed in the past twelve months, such as improvements to the central processing facilities and reworking and upgrading the salt-water disposal system have materially lowered our operating cost. We believe our current cost structure will allow us to remain profitable with oil prices in the mid-teens."

 

The funds paid in respect to the proposed Stanley-4 well, have now been returned, net of incurred costs including planning and onsite groundwork. The intention is to drill the well when oil prices have increased to a suitable level, thus timing remains unknown.

 

2.  At Greater Stanley, the plan remains to increase production by workovers on the existing producing wells. Recent production of circa 160 Bbls of oil per month (gross) is sufficient to hold the lease. Technical work suggests there may be potential to produce at higher rates from the Yegua sands.

 

3.  At the Arkoma project in Oklahoma, production operations continue.  Volumes have reduced in the quarter ended 31 March 2020 as a result of a focus on profit margins given the current oil and gas prices, and deferring capital expenditure such as installing power lines for down hole pumps. Mosman has not contributed additional cash to the Arkoma project this year and does not anticipate the need to do so.

 

4.  At the Welch Project no breakdowns or workovers occurred during April resulting in steady production. Daily production for April was not significantly different from the daily average for the 6 month period ended 31 December 2019.

 

Other Matters

 

The Legal action Mosman had instigated with the aim to recover funds from Blackstone Oil and Gas remains ongoing but has been stalled by the temporary closure of many Branches of Local Government due to the pandemic.

 

There is no update on the shareholding in Norseman Capital Limited, other than the Norseman Board has advised they are reviewing several potential acquisitions to revitalise that company.

 

 

John W Barr, Chairman of Mosman commented: "The Mosman Board acted quickly and decisively in March and matters remain in accordance with that plan.

 

"Completing the potential sale of Welch together with continuing to control costs are clearly the key objectives in the coming months. Despite difficult circumstances, the Board remains determined to deliver value to shareholders from its stated strategy."

 

Competent Person's Statement

 

The information contained in this announcement has been reviewed and approved by Andy Carroll, Technical Director for Mosman, who has over 35 years of relevant experience in the oil industry

 

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

 



 

Enquiries:

 

Mosman Oil & Gas Limited

John W Barr, Executive Chairman

Andy Carroll, Technical Director

[email protected]

[email protected]

 

NOMAD and Joint Broker

SP Angel Corporate Finance LLP

Stuart Gledhill / Richard Hail / Soltan Tagiev

+44 (0) 20 3470 0470

 

Alma PR

Justine James

+44 (0) 20 3405 0205

+44 (0) 7525 324431

[email protected]

 

Joint Broker

Monecor (London) Ltd

trading as ETX Capital

Thomas Smith

+44 (0) 20 7392 1432

Updates on the Company's activities are regularly posted on its website: www.mosmanoilandgas.com 

 

 

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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