Pantheon Resources plc Regulatory News (PANR)

8 Sep 2009 07:58



Pantheon Resources plc ("Pantheon" or "the Company"), the AIM-quoted oil and gas exploration company active in Louisiana and Texas, issues the following update:

Vision Rice University #1, Tyler County, East Texas (25% Working Interest)

The operator, Vision Resources LLC, has recommended that the Vision Rice University #1 well ("VRU#1") be plugged and abandoned solely for mechanical reasons. This decision was taken after the high pressure snubbing unit was unsuccessful in retrieving the stuck coiled tubing from the wellbore. 

Despite this decision, the overall prospectivity of the project remains undiminished. During the limited testing operations conducted, the VRU#1 well flowed natural gas, condensate and black oil. This has confirmed an extension of the adjacent Anadarko/Ergon field.

The difficulties encountered during drilling of this well were solely of a mechanical nature resulting from much higher than expected reservoir pressures and the unexpected presence of an "unconsolidated rubble zone". The presence of both of these features is considered positive for the overall project and should enhance the project's economics as follows:

1. In Austin Chalk wells, higher pressure is generally regarded as indicating higher potential reserves and productivity. The reservoir pressures encountered in the VRU#1 well may lead to flow rates in the upper tier of regional Austin Chalk producers if repeated in future wells. This well was in fact engineered for the expectation of higher reservoir pressures than the offsetting wells. The actual pressures encountered, however, exceeded those levels. 

2. Unconsolidated rubble zones typically exhibit higher porosity and permeability. Together these should lead to enhanced recovery and flow rate per well if confirmed. It is possible that this rubble zone may extend across a significant portion of the acreage which, if confirmed, should deliver a large area of upper tier targets with expected productive rates exceeding previous estimates. 

3. The presence of such a rubble zone may also lead to reduced future drilling costs. With more reserves estimated to be drained per well due to the higher permeability and porosity, a lower overall number of wells is required. Additionally, a shorter lateral section per well is anticipated. This should lead to reduced future capital expectations for the project.

The data received from the VRU#1 well provides the Company with greater confidence in the project's potential. Reviewing the technical data obtained so far, Pantheon's technical consultant has upgraded reserve estimates per well. These are now estimated at 8 bcfe per well, above the 5 bcfe average attained in the Anadarko/Ergon acreage. This had 44 commercial discoveries from 45 wells drilled, yielding a success rate of 98%. 

The operator does not expect similar difficulties for the remainder of the programme. Future wells will be engineered to cope with the higher reservoir pressures and for the presence of a rubble zone. The joint venture will now review the data from the VRU#1 well before deciding upon the location and timing for the next well. Pantheon does not expect drilling to commence for at least two months.

The Company is planning to arrange a conference call in the next fortnight to allow shareholders the opportunity to participate in a short presentation by management on the Austin Chalk, followed by a Q&A session. Details of the timing of this will be announced when arranged.

Jay Cheatham CEO of Pantheon Resources, stated: 

"Whilst obviously disappointed with this news, I reiterate that the outcome of this well was solely because of mechanical issues. In fact, the well proved a geological success discovering hydrocarbons and confirming the extension of the Brookeland field. Paradoxically, I believe that the factors which caused the problems in this well should significantly increase the project NPV. The Company will work hard over the coming months to ensure the funding and drilling of what I believe to be a very valuable asset. The information received from this well is extremely encouraging and I remain very bullish about the potential for this joint venture."

Photographs of gas flares while testing of VRU#1, and of the rubble formation, will be included in the version of this regulatory announcement on the Company's website.

For further information on Pantheon Resources plc, see the website at www.pantheonresources.com

Further information:

Pantheon Resources plc

Oriel Securities Limited (Nominated Adviser)