11 Jul 2016 07:00
11 July 2016
This announcement contains inside information.
Highlands Natural Resources plc ('Highlands' or 'the Company')
Update on the Helios Two Transaction
On 15 June 2016, Highlands, the London listed natural resources company, announced that it had reached a heads of terms with London listed Opera Investments Plc ("Opera") whereby Opera proposed to acquire all of the issued share capital of Highland's subsidiary, Highlands Helium Development Limited, the owner of Highlands' Helios Two natural gas and helium project in Montana, USA ("Helios Two").
Highlands announces that there is mutual agreement between Opera and Highlands to terminate the Acquisition. Highlands now plans to develop Helios Two itself and expects to provide shareholders with further updates in the coming weeks. The directors of Highlands wish the team at Opera well as it seeks further acquisition opportunities.
Helios Two Development Plan
Highlands has developed a two-phase development plan for Helios Two which is designed to first achieve proof of concept and secondly achieve self-sustaining revenue and cashflow.
Phase One
The first phase of the Helios Two project will be to achieve proof of concept and then establish requisite operating and marketing infrastructure. Highlands plans to develop Helios Two using a three-well pattern (a "Trident") consisting of two production wells paired to a single injection well. Phase One entails drilling and completion of the first Trident wells in order to establish concentrations and flow rates for natural gas, helium, water and other produced volumes.
Pending successful completion of the first Trident wells, Highlands proposes to install the separation, handling and midstream transportation infrastructure required to scale up operations. Highlands is in discussions with third parties regarding their potential involvement in this process.
Phase One is designed to be a fast-paced and capital-light program geared towards expeditiously establishing proof of concept and establishing critical infrastructure for expansion.
Phase Two
Building on the groundwork laid in Phase One, Highlands will complete further Tridents in Phase Two in order to bring Helios Two to a point of self-sustaining economics. The directors anticipate that this phase of the project will require either further funding or, alternatively, the involvement of third parties.
Highlands plans to develop Helios Two through dewatering, whereby gas-cut water is pumped from the target formation to lower reservoir pressure and release gas volumes trapped in fine pore throats. This methodology has been successfully demonstrated and commercialised in several plays around the world, which are detailed in the Competent Person's Report published by Knowledge Reservoir LLC dba RPS ("RPS") and available on Highlands' website. Highlands notes recent speculation regarding the lack flow of water or gas at the surface from a historic drill stem test ("DST") located in the Helios Two prospect area. However, Highlands wishes to reassure shareholders that a lack of surface flow is not only common, but was expected for the Helios Two prospect area, which is why RPS included significant pumping costs for all production and injection wells in the project's economic modelling.
**ENDS**
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