Beacon Energy. Regulatory News (BCE)

11 September 2023

Beacon Energy plc

("Beacon Energy" or the "Company")

Schwarzbach-2(2.) Well Update

Rig Release

Beacon Energy (AIM:BCE), the full-cycle oil and gas company with a portfolio of production, development, appraisal and exploration onshore German assets through its wholly-owned subsidiary, Rhein Petroleum GmbH ("Rhein Petroleum"), announces an update on the Schwarzbach-2(2.) ("SCHB-2(2.)") well.

SUMMARY

· As previously announced, the SCHB-2(2.) well has encountered an excellent 34-metre gross interval containing 28 metres of oil-bearing net reservoirs in the Pechelbronner-Schichten ("PBS") sandstones within the Stockstadt Mitte segment of the Erfelden field.

· These oil-bearing reservoirs were encountered approximately 25 metres high and 10 metres thicker than prognosis, with porosities averaging 18% in the Lower PBS and 21% in the Upper PBS, with no water-bearing sands in the 42m hydrocarbon column.

· As all these metrics are above or at the top of the range of pre-drill expectations, the likelihood is that this will result in a material upgrade to recoverable reserves in Stockstadt Mitte and a de-risking of 2.4 million barrels of contingent resources already ascribed to Schwarzbach South.

· Based on these excellent reservoir properties and the light oil recovered, standard oil-industry analysis indicates that an initial production rate in excess of 900 barrels of oil per day ("bopd") could be achieved. Higher rates of production have been achieved on historic wells in the area.

· Following perforation and acidization, reservoir clean-up operations commenced on Friday 8 September 2023 and since that time the well has produced a mixture of oil, gas and drilling fluids.

· Given delays in the programme the drilling rig must now be released but clean-up of the well will continue on site.

· Commercial production is expected to commence from the well aided by the installation of a rod pump which will have the capacity to deliver up to 250 bopd. This will not require a workover rig. It is expected that once the well is fully cleaned up and this rate has been achieved, the rod pump will be replaced with an Electrical Submersible Pump ("ESP") which has higher capacity.

· A presentation describing the results of the SCHB-2(2.) is available as an audiocast at https://stream.buchanan.uk.com/broadcast/64fda29b84cbf5eec802cc26 and on the Beacon Energy Website www.beaconenergyplc.com.

FORWARD PLAN

· Installation of the rod pump is expected to be undertaken during October. In the interim period reservoir clean-up will continue into the wellbore.

· Work will commence immediately to quantify expected reserve and resources increases.

· Existing development plans will be updated to reflect learnings from the SCHB-2(2.) well and increased resource base with the aim of accelerating drilling and maximising the value of this highly attractive asset.

Beacon Energy Chief Executive Officer, Larry Bottomley commented:

"The SCHB2(2.) well has been a challenging well from an operational perspective, with hole stability issues encountered in the initial and sidetracked hole sections, however it has encountered an excellent oil-bearing reservoir with thickness and properties that are far in excess of pre-drill prognosis.

The data we have gathered during the drilling of the SCHB2(2.) well indicates the potential for substantial reserve and production upside for the Stockstadt Mitte segment - up to and potentially more than the High Case (5.8 mmbbls) outlined in the Company's December 2022 CPR which clearly bodes well for the long-term value we believe we can realise from the asset.

We believe this well has the potential to deliver at very high rates and establishing these flowrates through clean-up of the wellbore, and eventual installation of an ESP is now our top priority although we won't be able to provide definitive guidance on production expectations until we have completed the clean-up and artificial lift solutions. At flow rates of 900 bopd, the Company would expect to deliver operating cash flows in excess of US$1.5 million per month (assuming $80/bbl Brent).

A comprehensive review of the drilling and completion operations and the technical challenges encountered will be undertaken so that lessons learned are incorporated into an updated field development plan.

The data provided from the SCHB-2(2.) well will also be incorporated into a field-wide study to understand the impact on both the risk and quantum of resources in the Schwarzbach South segment, currently assigned 2C contingent resources of 2.4mmbbls which will be targeted during the further development of the Erfelden field.

While the delay to fully understanding the production potential of this well is frustrating, the sub-surface results far exceed our pre-acquisition and pre-drilling expectation and we therefore remain pleased with the overall results of the SCHB2(2.) well and look forward to providing an update in due course."

Enquiries:

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The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018.

Technical Standard

The technical information in this announcement has been prepared under the PRMS - Petroleum Resources Management System created by the Society of Petroleum Engineers, a global standard of petroleum reserve and resource classification together with guidelines and accepted methodologies for the definition and estimation of petroleum resources and their monetary valuation.

Qualified Person's Statement

Mr Larry Bottomley, CEO at Beacon Energy, has reviewed and approved the technical information contained within this announcement, in his capacity as a qualified person, as required under the AIM rules. Mr Bottomley has over 40 years' experience in the oil & gas industry, prior to which he studied Geology (BSc.) at Imperial College, University of London, followed by Stratigraphy (MSc.) at Birkbeck College, University of London.

About the Erfelden Field

The Erfelden oilfield is the most northern oil field in the Upper Rhine Graben and is comprised of four juxtaposed structural segments: the mainly depleted Kuehkopf segment, the producing Schwarzbach Main segment, the Stockstadt Mitte segment which is the focus on the current development programme and the unproven Schwarzbach South segment. 

The westerly Kuehkopf segment was discovered by Exxon and produced oil between 1956 and 1985, who also operated the adjacent Stockstadt field. Both accumulations were discovered, appraised and developed from the subsurface description from legacy 2D seismic data. 

Rhein Petroleum (a wholly-owned subsidiary of Beacon Energy) subsequently secured the licence (Operator, 100%) and acquired an extensive 3D seismic survey which led to the discovery of the Schwarzbach Main segment in 2015 when the Schwarzbach-1 well (SCHB-1) discovered oil in the Oligocene Pechelbronner-Schichten ("PBS") sandstones in a North-South trending structural high at northern end of the Erfelden Field. The Schwarzbach Main segment is still producing light oil (37-38o API) from the SCHB-1a well through the Schwarzbach Production facility. 

The Schwarzbach-2(2.) development well (SCHB-2(2.)) has now proved the commercial potential of this segment. The independent Competent Person's Report published by the Company in December 2022 assigned 2P reserves of 3.784mmbbls and 3P of 5.754mmbbls to the Stockstadt Mitte segment. 

The development plan for the Stockstadt Mitte segment envisages 3 wells - the SCHB-2(2.) production well and subsequently an additional 2 wells; a producer and a water injector. The aim is that these additional wells will be drilled and funded from the free cash flow generated by production from the SCHB-2(2.) well. 

The drill pad for these 3 wells was prepared immediately adjacent to the Schwarzbach Production facility, which is wholly-owned and operated by the Company, and conductor pipes for each of these wells were set to a depth of 85m below ground level. A flowline from the drilling pad to the Schwarzbach Production facility will allow tie-back and hook-up as these wells are completed and put into production. 

The Schwarzbach South segment is undrilled, with the 2C Contingent Resources of 2.4mmbbls described in the CPR now significantly de-risked by the results of the SCHB-2(2.) well. This forward plan is that this segment will be the target of future drilling.