24 Sep 2014 09:40
REGENCY MINES PLC
("Regency" or the "Company")
Investment in US Onshore West Virginia Shallow-Oil Project
24 September 2014
Regency Mines Plc, the natural resources exploration and investment company with interests in oil in the United Kingdom, and nickel and other minerals in Australia, Papua New Guinea and Sudan, is pleased to announce that a 100% owned subsidiary has signed an exploration and investment agreement to participate in an unincorporated joint venture with Carter Oil and Gas (as Project Manager) and others for Regency to obtain a 25% working interest in the West Virginia Shallow-Oil Project ("WVSO").
Highlights of the WVSO:
· Regency committed to participate in two-well pilot program Q4 2014 with the option to invest in an initial expansion program of 12+ wells in 2015
· Builds on Regency's participation in Horse Hill UK onshore oil investment
· Shallow oil targets with associated natural gas; up to 5 pay zones to evaluate
· Plan targets 1860s to 1920s era oilfields using modern techniques, believed to have a majority of oil still in place; non-public information acquired on historic well locations
· Several nearby wells historically produced upwards of 20,000 BBLs
· Further expansion potential from additional fields and prospects
Project Development Plan
The concept behind the WVSO project is to identify and develop wells using open hole notch fracking ("OHNF") from up to 85 shallow oil fields containing over 2,000 wells originally drilled in West Virginia between 1860 and 1920. Original work on these fields was done with cable tool rigs using what would now be considered antiquated completion methods including shock completion and spring pole techniques, with little or no ability for secondary recovery. As a result of historic work, the operator believes that a majority of the original oil remains in place to be recovered. New wells will be drilled 500ft away from the historic well sites, based on experience with similar projects in Pennsylvania.
To date, two prospects, called Border and Mellin Ridge in Ritchie County, WV have been generated by Carter Oil and Gas, a Virginia based prospect generating company. Leasing and permitting for the initial wells has been completed and drilling is expected to start in Q4 2014.
Investment Summary
A 25% working interest ("WI") in the initial two wells to be drilled and operated by Abarta Oil & Gas Co. has been secured by Regency Resources Inc., a 100% owned subsidiary of Regency Mines Plc. The WI is equivalent to not less than 20.25% Net Revenue Interest ("NRI") as specified under the investment agreement. The remaining 75% working interest is to be held by various investors including a 25% stake by Abarta Oil & Gas Co.
Regency's share of the total estimated cost of 2014 activities is expected to be $128,000, which includes its share of the drilling and setup costs for the first two wells, estimated to be $512,000. The initial consideration of $19.5k will be settled on signing, with 30% of the balance of $108.5k due at spud and the remainder by cash calls during drilling operations. Decisions on further development of these two prospects will be made once results from the two-well pilot program become available as will the decision on additional prospect and lease acquisition and development.
Open Hole Notch Fracking
OHNF has been developed over many years by S.W. Neilly Corporation ("SWN"), a completion company based in Pennsylvania. OHNF utilizes a notching tool forcing air and sand under pressure to cut notches into targeted pay zones prior to fracking. This technique is employed at shallow depths in an open hole, where the notches guide the frack horizontally, eliminating the need for expensive pipe and perforation completion methods, and freeing minor production zones to flow freely to the wellbore once pressure falls.
This combined with no requirement for cement, production string and wireline charges, along with less overall rig time ultimately substantially reduces total well development costs. OHNF seeks to achieve the same production results as conventional completion methods with significant savings in well cost.
SWN has completed over 17,200 wells since its inception in 1981, and has pioneered the use of this technique across Pennsylvania and New York. To date it has not been utilized in West Virginia oil fields.
Andrew Bell, Chairman, comments:"The WVSO project offers the Company attractive potential returns and near-term cash flow for a modest investment and with a much lower risk profile than many mineral exploration investments. The strategy of partnering with experienced industry professionals, acquiring non-public information to identify potential well sites and marrying this with inexpensive and proven extraction techniques in the form of open-hole notch fracking, gives this opportunity excellent risk weighted returns.
This investment builds on our recent oil investment in Horse Hill, and shifts the firm's balanced portfolio towards a mix of longer term and higher risk mineral exploration projects, liquid investments, and cash flow generative oil and gas development. The Board feels that this move better positions the Company for growth and the prospect of near-term revenue generation reduces the risk profile. We look forward to providing further updates on this investment in due course"
For further information, please contact:
Andrew Bell0207 747 9960 or 0776 647 4849 Chairman Regency Mines Plc
Roland Cornish/Rosalind Hill Abrahams 0207 628 3396 NOMAD Beaumont Cornish Limited
Jason Robertson 0129 351 7744 Broker Dowgate Capital Stockbrokers Ltd.
Rupert Trefgarne 0203 128 8817 Media Relations MHP Communications
Notes:
West Virginia Oil and Gas
The development of West Virginia as an oil and gas province dates back to the mid-1800s. One of the first two oil fields in the United States prior to the Civil War was located at Burning Springs Run, WV, and by 1876 there were 292 wells in the State, producing 900 barrels of oil per day. The oil industry peaked in West Virginia around 1900 at production levels of 16M barrels, although it remained the leading gas producer in the US until 1917.
Abarta Oil & Gas Co. - Operator
Abarta Oil & Gas Co. is an experienced Appalachian driller and operator formed in 1978. Currently Abarta owns interests in over 2100 wells and operates over 750. Abarta Oil & Gas Co. is a division of Abarta Inc., which is a diversified business that includes several Coca Cola bottling plants and other operations. Abarta is to take a 25% working interest in the WVSO.
Carter Oil and Gas - Project Manager/Prospect Generator
Carter Oil and Gas is a Virginia based Company founded in 1991 by Kent Carter, a Harvard Business School MBA graduate. The company acts as a prospect-generating entity, providing geology work-up, leasing, drilling rights acquisition and related services on the prospects to be drilled. It has been involved in over 250 wells in West Virginia to date, partnering with leading operators such as Continental Resources and Marathon Oil.
Philip Martin - Consultant Geologist
Philip Martin is a geologist with over 50 years of experience in the Appalachian Basin. He led a study in 1981 which led to the identification of the relevant old oil fields in West Virginia. He will be working closely with Carter Oil and Gas to drive the exploration effort for the WVSO project and to assist in future prospect development.