PGR.L Regulatory News (PGR)

11 June 2019

Phoenix Global Resources plc

("Phoenix" or the "company")

Q1 2019 Operational Update

Phoenix Global Resources plc (AIM: PGR; BCBA: PGR), the upstream oil and gas company offering its investors direct exposure to Argentina's Vaca Muerta shale formation and other unconventional resources, is pleased to announce its operational update for the first quarter of 2019.

Operational highlights

Financial performance (unaudited)

Outlook

Javier Vallesi, COO said:

"The safe completion of our first two horizontal wells at Mata Mora is a significant technical and operational step forward for the company. These wells are important to appraise the potential of the Vaca Muerta formation in this key block. The wells were drilled and completed in accordance with the planned well design and both wells will shortly be placed on flowback. We expect to be able to update the market on the result of these wells and their impact on the Mata Mora development plan in early Q3 2019.

We have also been granted an unconventional concession for the Puesto Rojas block in Mendoza. The concession is the first of its kind to be granted in the province and carries a 35-year term. The award of the unconventional concession paves the way for us to move forward in the continued appraisal of the various unconventional opportunities present in the block and, ultimately, to development and production of unconventional oil and gas in this key concession."

For further information, please contact:

About Phoenix

Phoenix Global Resources is an independent oil and gas exploration and production company focused on Argentina and listed on the London Stock Exchange (AIM: PGR) and Buenos Aires Stock Exchange (BCBA: PGR). The Company has over 1.8 million licenced working interest acres in Argentina (of which over 0.7 million are operated), 57.1 million boe of working interest 2P reserves and average working interest production of approximately 10,249 boepd in 2018. Phoenix has significant exposure to the unconventional opportunity in Argentina through its approximately 700,000 working interest acres with Vaca Muerta and other unconventional potential.

The Company's website is www.phoenixglobalresources.com

Licences and business development

In April 2019 the Province of Mendoza granted the company an unconventional concession for the entirety of the Puesto Rojas block

The concession carries a primary term of 35 years with provision for extensions thereafter. The concession includes an initial pilot phase with certain works to be completed by June 2022. On conclusion of the pilot phase the company has the option to move into unconventional development or to terminate the unconventional concession without penalty and resume the conventional development of the block.

Drilling and completions activity

Mata Mora

The primary operational focus in 2019 to date has been on the drilling and completion of the company's first two horizontal wells, the objective of which is to appraise the development potential of the Vaca Muerta formation at Mata Mora.

A two-well pad was started in September with the drilling of the first horizontal well, MMx.1001. The second horizontal well, MMx.1002, was spudded in late January and reached a total depth of 5,370 metres before being cased and cemented. The horizontal section was drilled with a total cased lateral length of 2,058 metres. As with MMx.1001, 90% of the lateral section of the second well was successfully drilled within a seven-metre window in the Vaca Muerta formation with a significant portion remaining within a narrower three-metre window.

Both wells were completed in a simultaneous zipper-frac operation that was completed in late May with 80 frac stages successfully completed across the two wells.

The flowback stage that recovers the frac water from the wells is due to commence in mid-June with initial oil production expected after approximately 45 days of flowback. Approximately 20 days following this flowback period, the oil production rates are expected to increase to levels that are sufficient to estimate IP rates for the wells.

Puesto Rojas Area

The CDM 3012 well was completed and placed on pump in Q1 2019; this is the final well from the 2018/19 completions campaign that is aimed at appraising Puesto Rojas for large scale unconventional development. The completions campaign across eight wells in total included both full and limited tests of the potentially productive horizons present on the block in order to define a development plan and sequence for the development of the various unconventional opportunities present in the area. In addition, the previously drilled CDM-3004 well was completed in April 2019 and also placed on flowback.

As a result of the work done in the completions campaign, the relatively shallow folded Agrio formation has been selected as the first unconventional development programme for the area. The development of the folded Agrio has relatively lower risk and cost profile whilst still being expected to yield high initial production and promising project economics. The initial development is due to commence in 2H 2019 with up to seven unconventional vertical wells currently planned.

It is expected that development of the Vaca Muerta at Puesto Rojas will follow the development of the folded Agrio and the appraisal and development work planned at the Mata Mora and Corralera concessions.

Partner operated activity

YPF - Chachahuen and El Manzano Oeste

The main partner-operated drilling activity was undertaken by YPF at the Cerro Morado Este concession that forms part of the Chachahuen asset. A total of nine wells were drilled on the concession with seven wells in Cerro Morado Este and two in Chachahuen Sur. The initial work performed at Cerro Morado Este in the period was part of the activity to delineate the block and to identify the most potentially productive areas for development.

The lower level of drilling at Chachahuen Sur reflects the move of the development focus to Cerro Morado Este as Chachahuen Sur has been largely drilled out. The operational focus at Chachahuen Sur is now on enhanced recovery through waterflood with limited additional production drilling.

In addition, a limited number of exploration wells were drilled at the YPF-operated portion of the El Manzano Oeste (Resto) concession. Completion of these wells started at the end of Q1 2019 and the results from the wells are expected toward the end of Q2.

Other partner operated activity

Chañares Herrados

In May, the company was notified that the Province of Mendoza had issued a decree terminating the extension to the exploitation licence for the Chañares Herrados block that had previously been granted to Chañares Energía S.A. The notification was given as a result of non-compliance by Chañares Energía S.A. in relation to commitments under the concession.

The company holds an interest in some existing wells in the block through a joint venture agreement in place with Chañares Energía S.A., which establishes that the latter is the only license holder of the block

Chañares Energía S.A. has informed the company that it will take legal actions with the aim of reversing the termination of the license and continue with the exploitation of the block.

Chañares Herrados block currently produces 500 boepd and has 2P reserves of 2.3 million boe, both net to the company's interest

Q1 2019 production

Average total daily production volumes in Q1 2019 compared to full year 2018 and the previous two quarters were as follows:

*adjusted for volumes under-reported by Chañares Herrados operator in Q3 2018

Total average daily production in Q1 2019 was 9,636 boepd.

Neuquina basin

Neuquina basin production was down for the quarter mainly due to natural decline on existing assets not yet offset by new production.

Puesto Rojas Area

Operator: PGR

In Q1, workovers were performed on five wells as part of the unconventional appraisal programme at Puesto Rojas. The CDM 3001 and 3007 wells were recompleted from the Chachao and Vaca Muerta formations with peak rates of 20 bopd from CDM 3001 as part of a limited test and 115 bopd from CDM 3007. The peak rate on CDM 3007 is increased from the 98 bopd level previously reported.

The CDM 3012 well similarly saw production gains following installation of a pump with production increasing from the previously reported 88 bopd to 113 bopd.

The CDM 3023 well was recompleted in the Vaca Muerta and the Agrio formations in January 2019 achieving a peak rate of 123 bopd from the Vaca Muerta formation using a rod pump and at a peak rate of 356 bopd in the Agrio formation that flowed naturally up the annulus.

 The PR 53 well was similarly recompleted in the Agrio formation and achieved a peak rate of 74 bopd.

Chachahuen Sur and Cerro Morado Este

Operator YPF

Production at Chachahuen Sur was slightly down in Q1 2019 as the development focus shifts towards delineation activity at Cerro Morado Este aimed at determining the areas within the concession that have the most production potential.

During the quarter, YPF drilled nine new wells most of which were part of the delineation work at the Cerro Morado Este concession and related to the delineation program for this block.

Austral basin

Production was down in the Austral basin with minor increases realised from the Tierra del Fuego assets not offsetting decline and unplanned downtime events at the Santa Cruz Sur assets.

Santa Cruz Sur

Operator: ROCH S.A.

Production decreases at Santa Cruz Sur were driven largely by natural decline and several unplanned downtime events affecting multiple wells at Cerro Norte. In the quarter, four minor pulling jobs for well repairs were performed with no other significant activity undertaken.

Tierra del Fuego

Operator: ROCH S.A.

Production increases in Tierra del Fuego were largely driven by continued improvements in production performance in the SM.x-1001, with minor incremental production from the SM.a-1003 well that came online in March. This served to offset production decline on other wells. During the quarter three minor pulling jobs were performed.

The continued development plans for both Santa Cruz Sur and Tierra del Fuego remain under discussion between Phoenix and the asset operator, ROCH S.A.

Additional information

Production summary

All production figures in the tables and the text of this announcement are net figures for the company's interest in the various licences. Totals may not add due to rounding.

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