Extract from RNS 22.09.201610 Nov 2017 12:41
By way of background, during 2014, Ryder Scott Company LP ("Ryder Scott") completed a reserve report on the Group's Paradox acreage and the report concluded that the Mean Un-Risked Recoverable Prospective Resources across the acreage were over 1.1 billion barrels of oil and around 2.2 trillion cubic feet of gas.
Prior to the successful disposal of its interest, the Paradox Basin was actively exploited by Fidelity Exploration and Production ("Fidelity"), mainly in the Cane Creek Formation, south-south east of our main Paradox lease blocks. Fidelity had been the most active operator in the Paradox Basin over the past few years with average Q1 2015 production of 2,100 barrels of oil per day. In addition to Fidelity's success, multiple wells in the area of the Group's leases have produced oil and gas to surface from various formations.
The Board has concluded that the optimal strategy to unlock value from the Paradox should be the same as that used by Fidelity, namely a 3D seismic shoot for drill target identification, targeting high natural fracturing areas followed by drilling. Due to the success of this process most of the wells have not required a frack.
Our internal estimates show the single-well economics for a Paradox well are extremely attractive. At an oil price of US$44 per barrel and a well drilling cost of US$10 million, our estimates show that the Internal Rate of Return of the well would be around 30% with a pay-back period of just over two years (all other things being equal).
The importance of the 3D seismic in unlocking the potential of the Paradox acreage should not be understated,.
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