Prospex Eng Regulatory News (PXEN)

Prospex Energy PLC / Index: AIM / Epic: PXEN / Sector: Oil and Gas

1 October 2021

Prospex Energy PLC

El Romeral - Well Workover and Optimisation Contracts

Prospex Energy PLC, ('Prospex' or the 'Company') the AIM quoted investment company (AIM:PXEN) focused on European gas and power projects, is pleased to announce that its joint venture company Tarba Energía S.L. ("Tarba") has contracted the well intervention work and a programme for system optimisation and automation at its gas to power project at El Romeral in Southern Spain ("El Romeral").

Upon success, the well workover has the potential to increase gas production by up to 15,000 cubic metres per day to 27,000 cubic metres per day and would allow the subsequent start-up of a second generator to double electrical output. In addition, as described below, the system optimisation project is expected to boost income from power generation by up to 65%.

Highlights

· Contracts committed on 30 September 2021 with Dajan Well Services S.r.l. for the well workover project.

· The gross budget of €89,000 for the well workover has increased to €103,000 which has been fully approved by Tarba, the operator of the plant, to cover the costs of extra equipment to meet HSE commitments.

· The workover remains on schedule for the week commencing 18 October 2021.

· Contract also committed with Power Solution Iberia S.A. ("PSI") to automate plant operations to allow continuous operation of the generators. The work will be executed during the planned plant shut down in October. The approved budget for the work being carried out by PSI is €71,000.

· Contract already committed with Reda Oilfield UK Ltd. for the foaming surfactant chemicals which are necessary to allow removal of produced formation water from the tubing.

The Company has a 49.9% interest in El Romeral through its interest in Tarba. The gross budget for the well intervention work is €103,000, comprising €79,000 for the well intervention and €24,000 for data acquisition. Tarba has committed to increase the gross budget for the intervention work by €14,000 from €65,000 to €79,000 to cover the cost of mobilising extra equipment including a larger flare stack to the well sites in anticipation of higher flow rates from the well interventions. This extra cost has been approved to avoid any possibility of having to vent the gas produced during the testing programme and to ensure that any produced water and foaming surfactants can be handled safely.

As announced on 22 September 2021, the well intervention work is planned on one of the suspended wells that is connected by pipeline to the El Romeral power station. This 'Rio Corbones' well was shut-in two years after first production in 2014 due to water build up in the well and has been suspended since then pending a workover. Produced water had collected across the production interval preventing gas production and so a low-cost workover has been designed to lift this water from the well which has re-pressurised since it was shut in. The workover will involve the injection of foaming surfactants via the production tubing to create a low-density foam from the gas and water in the well. This will reduce the water that has built up in the tubing and allow the gas to flow to surface.

In addition, a plant optimisation project is underway with PSI to install systems, equipment and software to allow the safe automated operation of the power plant 24 hours a day allowing continuous operation of the generators. This work has been scheduled during the planned plant shut down in the week commencing 18 October 2021.

Mark Routh Prospex's CEO commented:

"We have supported Tarba in agreeing to the extra costs of this well workover plan in order to protect the environment and to ensure that suitable equipment is readily available on site to ensure the safe and optimum outcome of the well intervention. We have modelled flow rates from the workover which had the potential to exceed the safe limits of the flare stack and other equipment initially proposed. This decision gives this small low-cost workover plan the maximum chance of success, so that it has the potential to make a significant impact on Tarba's net income.

"The agreed system upgrade with PSI to automate the plant for continuous operation has been scheduled during the planned October plant shut down. This alone could allow an increase of income from electricity generation by up to 65%, since the generators are currently shut down overnight and on Sundays.

"Wholesale electricity prices in Spain continue to rise. The plant sold electricity this month at prices exceeding €200/MWh, a four-fold multiple of the average wholesale electricity price for the 12 months to May 2021. Gross income for Tarba at El Romeral has already exceeded €194,000 in September and this figure could double in the coming months after the shutdown following the planned plant optimisation programme and with a successful outcome of the well workover."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

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