Predator Oil Regulatory News (PRD)

3 October 2018

Predator Oil & Gas Holdings Plc / Index: LSE / Epic: PRD / Sector: Oil & Gas

Predator Oil & Gas Holdings Plc

("Predator" or the "Company" and together with its subsidiaries "the Group")

Operational Update Trinidad - Carbon Dioxide Enhanced Oil Recovery ("C02 EOR")

 Highlights

· Initial Reservoir Engineering Assessment completed, independently validating the feasibility of the technical case for C02 EOR operations;

· Combined scoping production rate of 300 bopd forecast for the initial two wells, which represents greater than 6 times current well production rates from these selected wells;

· Independent estimates of daily C02 injection rates at least 35% less than management's estimates, resulting in a reduction in anticipated operating costs;

· Start-up capital costs reduced to less than US$ 600,000, well below the Company's budgeted cash for the Pilot C02 EOR Project;

· Surface equipment sourced and delivery times to Trinidad within the scope of the existing Project Schedule;

· Exclusivity Period under Heads of Agreement ("HOA") with the local C02 Supplier to enter into a Gas Sales Agreement extended to 30 November 2018, to facilitate finalising commercial terms based on the new reservoir engineering assessment;

· Incremental resources for the AT-4 Block, approximately 10% of the area of the Inniss-Trinity Field, to be targeted by Pilot C02 EOR operations estimated at 859,000 barrels, representing an incremental recovery factor of 12.3%;

· Net-back after taxes and costs forecast to be in the range of US$10 - 12 per barrel based on an un-escalated WTI Spot Price of US$73.25 per barrel;

· Potential for a significant upscaling to other parts of the Inniss-Trinity field based on current expectations of forecast available C02 Supply;

· Subject to replicating a successful C02 EOR pilot in the AT-4 Block, potential exists to target between 8.12 and 15.62 million barrels of incremental resources;

· Operational and environmental meetings held in Trinidad to progress regulatory consents and confirmation that Q1 2019 has been set as the target for first incremental production from Pilot C02 EOR operations, subject to regulatory approval.

Predator Oil & Gas Holdings Plc (PRD), the Jersey-based Oil and Gas Company, today provides an update on its progress onshore Trinidad.

Onshore Trinidad - Inniss-Trinity oil field Pilot C02 EOR

Initial Reservoir Engineering Assessment

The Company has received and reviewed the Initial Reservoir Engineering Assessment for the proposed Inniss-Trinity Pilot C02 EOR Project produced by Dr. John Tingas PhD & MSc in Petroleum and Chemical Engineering. Dr. Tingas has 44 years' of industry experience including with Shell, BP, Amoco, BG Group, OMV and Gaffney Cline.

The initial assessment confirms the technical feasibility of C02 EOR operations in the Inniss-Trinity oil field.

Whilst there are technical challenges represented, for example, by the high water cuts for many of the currently producing wells in the field that have been caused primarily by a previously executed waterflood project, these challenges can be addressed by C02 injection when combined with the application of an appropriate reservoir engineering management plan.

Successful C02 EOR is common in the United Sates in fields that have previously undergone waterflood.

Operational Plan

The operational plan has been devised to minimise the above technical challenges whilst maximising the opportunity for miscible C02 EOR through which higher production rates and recovery factors are potentially achievable.

Initially C02 is to be injected for a short period into the AT-5X and AT-12 wells to target the Herrera #4 and #5 Sands and the Herrera #1, #2 and #3 Sands respectively. Maximum C02 injection rates will be up to 13 metric tonnes per day at an injection pressure of up to 2,600 psia. This will be required to re-pressure the reservoirs near to their original pressures.

Thereafter updip wells AT-13 and AT-4 will be injected continuously with up to 40 metric tonnes per day of C02 at up to similar injection pressures. AT-5X and AT-12 will cease to be injectors and become production wells.

Estimates of daily C02 injection rates have been reduced by the Initial Reservoir Engineering Assessment by at least 35%, resulting in a substantial reduction in anticipated operating costs per barrel of oil produced.

This Pilot Design is considered optimum, based on the currently available reservoir data, for: increasing the pressures in the vicinity of the production wells to avoid precipitation of asphaltene and waxes; for lowering oil viscosity by dissolved C02; for generating very low water cuts; and for managing gas-oil ratios. Bottom hole flowing pressures will be constrained to 3% to 12% higher than the initial reservoir pressure to avoid reservoir rock fracture.

The ability to modify the Pilot Design parameters is a part of the operational plan to accommodate additional reservoir data collected from the Pilot operations.

Forecast Scoping Production Rates

Successful implementation of the Operational Plan is forecast to result in a combined average production rate of 300 bopd from up to 5 Herrera sand intervals spread over two production wells.

Recent production from these wells has been less than 50 bopd. Successful Pilot C02 EOR results are therefore forecast to increase these production rates by greater than 6-fold.

By comparison average annual production from one conventional infill development well was forecast to be 50 bopd for the most recently proposed infill development well.

Production well conditions for the proposed C02 EOR wells are assumed to be sustainable for a long period because of the continuation of C02 injection updip, therefore the rapid decline rates seen in the conventional wells in the field should not be applicable.

Forecast Recoverable Resources

Recoverable resources within the AT-4 Block, which is the focus of the initial Pilot C02 EOR Project, are forecast to be 859,000 barrels for full-C02 EOR. This represents a 12.3% recovery factor based on the former operator Texaco's estimate of original oil in place. The AT-4 Block represents approximately 10% of the entire area of the Inniss-Trinity field.

Original oil in place estimates for the Inniss-Trinity field vary between 68 million barrels (Texaco 1973), 150 million barrels (Gaffney Cline CPR for FRAM Exploration Trinidad Ltd ("FRAM") 2011) and 89 million barrels (SLR Consulting CPR for the Company 2018).

Assuming the AT-4 Block Pilot C02 EOR were to be replicated throughout the field, management's estimates of potential recoverable resources for field-wide C02 EOR range from 8.12 million barrels to 15.62 million barrels based on the more recent original oil in place estimates in the CPR's.

Following initial results of the AT-4 Block Pilot C02 EOR, including history matching production performance with the various estimates of oil in place, the Company will be in a better position to commission an updated independent CPR to address resources and to narrow down the currently wide range of estimates for oil in place that may be attributed historically to the exclusion of poorer quality reservoir intervals that may respond well to being swept by a C02 flood.

C02 Supply Contract

The Exclusivity Period under the previously announced Heads of Agreement ("HOA") with the local C02 Supplier to enter into a Gas Sales Agreement has been extended to 30 November 2018 to facilitate finalising commercial terms based on the new reservoir engineering assessment. The deadline for the commencement of C02 deliveries has also been extended to 31st January 2019 to allow for the results of the Initial Reservoir Engineering Assessment to be addressed in the Take-or-Pay terms of the Gas Sales Agreement.

There is the potential for a significant upscaling to other parts of the Inniss-Trinity field based on current expectations of forecast available C02 Supply and subject to the results of the Pilot C02 EOR in the AT-4 Block.

Capital Costs

Sourcing surface equipment for Pilot C02 EOR operations is progressing and delivery times for delivery to Trinidad are well within the scope of the existing Project Schedule.

Start-up capital costs have been reduced to less than US$ 600,000, well below the Company's budgeted cash for the Pilot C02 EOR Project. This provides ample headroom to progressively upscale the C02 EOR operations over time, as additional reservoir information and production data are collected from the Pilot C02 EOR in the AT-4 Block, using surplus working capital and organic cash flow from production.

Guidance on Potential Net-Back

Net-back after taxes and costs are forecast to be in the range of US$10 - 12 per barrel based on an un-escalated WTI Spot Price of US$73.25 per barrel and the Company's internal economic model. Additional information from the initial results of the Pilot C02 EOR operations will be required to confirm or adjust the forecast net-back.

Project Schedule

Operational and environmental meetings have been held in Trinidad to progress regulatory consents and to agree a project schedule that works for all parties given that this is the first large-scale C02 EOR project in Trinidad for a number of years. As a result a target of Q1 2019 has been set for first incremental production from Pilot C02 EOR operations. This is consistent with the terms of the Company's amended Well Participation Agreement with FRAM.

Paul Griffiths, Chief Executive of Predator, commented:

"We are absolutely delighted with the results of the Initial Reservoir Engineering Assessment as it tangibly confirms our long-held belief that C02 EOR is the way to enhance oil recovery at commercial rates from Trinidad's mature oil fields. We have always been careful to tick the boxes systematically in the lead-up to implementing our Pilot Project. Experience has shown that it is essential to get the planning and understanding as complete as possible prior to executing operations in order not to prematurely throw away the opportunity for our shareholders to participate in an exciting phase in the Company's growth strategy. A successful Pilot Project opens the door to expedient upscaling to further develop multi-million barrel producing oil fields onshore Trinidad using the technology and vision being pioneered in practice by your Company, potentially establishing a niche position for the Company in Trinidad. We look forward to keeping the market updated on our Trinidad operations together with our progress offshore Ireland with our Corrib South Project where we await the approval of our Frontier Exploration Licence."

This announcement contains inside information for the purposes of Article 7 of the Regulation (EU) No 596/2014 on market abuse

For more information please visit the Company's website at www.predatoroilandgas.com or contact: 

Enquiries:

Notes to Editors:

Predator is an oil and gas exploration company with the objective of participating with FRAM Exploration Trinidad Ltd. in further developing the remaining oil reserves in the producing Inniss Trinity oil field onshore Trinidad, primarily through the application of C02 EOR technology. Potential for cash flow exists by executing a Pilot Enhanced Oil Recovery project using locally-sourced carbon dioxide for injection into the oil reservoirs ("C02 EOR"). Near-term expansion and growth potential is focussed on upscaling the C02 EOR operations in the Inniss-Trinity oil field and potential acquisitions of assets suitable for C02 EOR development.

In addition, Predator also owns and operates exploration and appraisal assets in current licensing options offshore Ireland adjoining Shell's Corrib gas field in the Slyne Basin on the Atlantic Margin and east of the Kinsale gas field and Barryroe oil field in the Celtic Sea.

The Company has a highly experienced management team with a proven track record in the oil and gas industry.