SEA.L Regulatory News (SEA)

14 Jan 2005 07:00

Ramco Energy PLC14 January 2005 January 14th 2005 RAMCO ANNOUNCES SEVEN HEADS UPDATE AND BULGARIAN FARM-OUT Ramco Energy plc (Ramco), the Aberdeen based exploration and production company,announces an update for the Seven Heads gas field in the Celtic Sea and thecompletion of a farm-out of a part of its acreage onshore Bulgaria. Ramco SevenHeads Limited (RSHL), a wholly owned subsidiary of Ramco, is Operator of theSeven Heads gas field. The Seven Heads field has been Ramco's priority over much of the past year, butwe have also been actively negotiating a series of farm-out agreements with theobjective of reducing the Group's future capital expenditure requirements whilstretaining an interest in the exploration upside. During the first half of lastyear we announced the farm-out of a part of Ramco's interest in the Seven Headsoil potential and we have now concluded a farm-out deal over a part of ouronshore interests in Bulgaria. SEVEN HEADS Technical Review A comprehensive technical review of the geophysical, geological and recentproduction data from the Seven Heads gas field has been completed and assessedby the Seven Heads partners, RSHL's Bankers and the Petroleum Affairs Divisionof the Irish Government. The key finding of the study is the Seven Heads reservoir is significantly morecompartmentalised than had been anticipated and the production wells areconnected to a smaller volume of gas bearing rock than had been expected.Consequently each well is draining a significantly smaller reservoir area thanoriginally interpreted. It is believed this is a result of the presence of moresevere faulting and stratigraphic compartmentalisation than was apparent priorto development. The original interpretation of the Seven Heads field was of a single gasaccumulation in a structure completely filled to the "spill point". It wasrecognised there were highly permeable, good quality sands, and additional gaswas present in lower permeability sands. This pre-development interpretation wassupported by seismic maps, well logs, well tests, cores and pressure dataobtained from six exploration and appraisal wells and was endorsed by severalindependent reservoir engineering companies. New pressure data, collected during the development drilling programme andproduction phase, has illustrated subtle pressure differences between some ofthe sands. This demonstrates the sands are isolated from one another. Analysisof production data confirms some of the gas in the lower permeability sands isbeing produced, but at rates significantly lower than anticipated by even ourmost cautious predictions. The technical review has concluded the wateraccumulation experienced in some of the well bores is the result of condensationof water vapour naturally contained in the gas. This only occurs because the gasis being produced at a much lower rate and pressure than had been expected, dueto the greater compartmentalisation. The water build up is being controlled byshutting in each well and allowing a pressure build up before reopening the wellto unload the water. The technical review has identified a number of sands in two of the existingwells which appear to contain gas and which are currently not open to the wells.We are therefore assessing the possibility of opening these sands for productionby adding new perforations in these wells during 2005. The precise timing andthe economic viability of such work depends on the availability of a suitablevessel. Options, including the use of a drilling rig or a dynamically positionedwell intervention vessel, are currently being evaluated and discussed withpartners. The earliest the work could be undertaken is May 2005. The technical review has also indicated it is likely substantial additional gasmay be present elsewhere in the field. However, this would require to besubstantiated through acquisition of 3D seismic, which would also be critical toensuring the optimal placement for drilling new wells. Current Production and Gas Sales Since the field first failed to produce sufficient gas to meet RSHL'sobligations under its Gas Sales Agreement (GSA), RSHL has been suffering theadditional cost burden of importing the shortfall quantities of gas fromScotland. This situation ended at the start of the new gas sales year on 1stOctober 2004. At that point our contractual commitments under our GSA with RWEIreland Limited (RWE) changed and we are now nominating sales volumes that matchfield deliverability. The commercial arrangements necessary to enable us to sellthe additional volumes of gas that we anticipate following the completion of theperforations during the current gas sales year are in place. A further improvement in the commercial situation has been achieved throughprofiling the field's gas production. In order to maximise gas sales revenue,the production profile of the field is being managed to maximise productionduring the winter months when gas prices are normally highest. Currently thefield is producing 12 mmscf/d and forecasts indicate that without theperforation programme, the likely volume of production in the current gas salesyear will be approximately 2 bcf. Reserves As stated above, the technical report indicates the field is significantly morecompartmentalised than originally anticipated and this obviously has a materialimpact on the field's recoverable reserves. It is currently Ramco's view thatapproximately 19 bcf is recoverable from the existing wells in addition to the 9bcf produced to-date. If additional wells are successfully drilled and producedthen the recoverable reserves figure could rise to approximately 83 bcf. Whilstextremely disappointing, these figures are within the range of downsidepossibilities identified in the original Plan of Development. Ramco effectively wrote off its interest in the field when it made a substantialimpairment provision in its 2003 accounts, the outcome of the technical reviewconfirms that to be the appropriate treatment. Banking RSHL's bankers have temporarily waived certain rights under the bankingagreements in order to allow RSHL to progress detailed negotiations with anumber of third parties interested in providing the additional investmentnecessary to undertake both the perforation programme and 3D seismic surveywork. A separate announcement will be made once these arrangements arefinalised. BULGARIA Ramco also announces that its wholly owned subsidiary, Ramco Bulgaria Limited(RBL) and its partner Anschutz Bulgaria Limited (Anschutz) have agreed afarm-out with Chimimport JSC over their A-Lovech acreage onshore Bulgaria. The A-Lovech block lies approximately 80 km to the north east of Sofia andcovers 3,558 sq km. RBL (20%) and Anschutz (80%) have been working together onthe acreage over the past three years and have agreed that Chimimport, aBulgarian company with a subsidiary specialising in seismic acquisition, willjoin them for the next phase of exploration. Chimimport will earn a 45% interestin the acreage by completing 570 sq km of 3D seismic. Once completed, thefarm-out will result in the group's interests being Chimimport 45%, Anschutz 44%and RBL 11%. The seismic acquisition programme will be aimed at multiple geological targetsand is likely to be carried out between July and November 2005. OTHER FARM-OUTS Ramco is also at an advanced stage of negotiations of other farm-out agreementsover its exploration acreage. Further announcements will follow if thesenegotiations are concluded successfully. ENQUIRIES: Ramco Energy - AberdeenSteven Bertram Group Financial Director 01224 352 200 College Hill - LondonNick Elwes 020 7457 2020 Fleishman-Hillard Saunders - DublinMichael Parker 00353 1 618 8450 Notes The Seven Heads partners are RSHL (Operator) 82.5%, Northern Exploration Limited(a wholly owned subsidiary of Ramco) 4%, Lundin Ireland Limited 12.5% (sale toIsland Oil & Gas pending) and Sunningdale Oils (Ireland) Limited 1.0%. This information is provided by RNS The company news service from the London Stock Exchange