Pilot CO2 EOR Trinidad Results & Operations Update

RNS Number : 2357M

Predator Oil & Gas Holdings PLC

20 January 2021

 

FOR IMMEDIATE RELEASE

 20 January 2021

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

     LEI 213800L7QXFURBFLDS54

  Predator Oil & Gas Holdings Plc

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

Pilot CO2 EOR Trinidad Results and Operational Update

  Highlights

· Very encouraging Pilot CO2 EOR results support pre-injection desktop production plateau forecasts of 243 -547 bopd from Herrera #2 Sand

· CO2 sequestration potential confirmed

· CO2 EOR services business strengthened and de-risked as marketable asset

· Guercif exploration well planning targeting Q2 2021 spud

· Guercif core area gross prospective gas resources 819 to 1,823 BCF

Predator Oil & Gas Holdings Plc (Predator), the Jersey-based Oil and Gas Company with operations in Trinidad, Morocco and Ireland, announces the results of its Pilot CO2 EOR Project ("Pilot CO2 EOR") in the Inniss-Trinity field onshore Trinidad.

The Pilot CO2 EOR programme is designed to demonstrate safe injection of anthropogenic CO2; to allow for sufficient lag time post-injection for reservoir pressure to stabilise; to collect oil viscosity data; and to use the results to evaluate and calibrate the pre-injection desk-top production forecast and the CO2 EOR commercial model. Pilot CO2 EOR is focussed on a single reservoir sand of the five producing Herrera reservoirs in the Inniss-Trinity Field, the Herrera #2 Sand, and a part of the field, the "AT-4 Block", representing approximately 10% of the total area potentially available for CO2 EOR injection.

The objectives of the Pilot CO2 EOR have been successfully achieved, despite the unforeseen COVID-19 pandemic; electrical power outages influencing the efficiency of the Inniss-Trinity field operations, the understandable regulatory delays due equally to COVID-19 and the introduction of a  new CO2 EOR operating system being employed for the first time in Trinidad at the Inniss-Trinity field, the requirement for flexible operations to find solutions to overcome well integrity issues in some of the wells in the AT-4 Block that were drilled over 60 years ago, and the increasing competition for workover rig time.

During the period of the Pilot CO2 EOR operations, the commercial model has been strengthened by optimising operating costs, the rise in WTI oil price from US$30.74/brl on 18 May 2020 to  US$53.02/brl on 15 January 2021, and the increased threshold to US$75/brl before Supplementary Petroleum Profit Tax is applied to operating profits.

Pilot CO2 EOR results for the period 18 May 2020 to 7 January 2021

· 443.58 metric tonnes ("MT") of CO2 injected over a planned cumulative period of 45 days. This represents 2% of the pre-Pilot desktop volume estimated to be required to recover 459,000 barrels of oil from the Herrera #2 Sand over the five year life of a full-scale CO2 EOR operation in the AT-4 Block.

· AT-5X Herrera #2 Sand oil viscosity, referenced to an ambient temperature of 60°F (versus reservoir temperature of 128°F), reduced from 13.926 centistokes on 24 November 2020 to 9.656 centistokes on 15 January 2021 , a 30.67% reduction for the 2% of forecast CO2 volume injected to date.

· An increase in AT-5X between 18 May 2020 and 7 January 2021 of the Herrera #2 Sand stabilised reservoir pressure of 62 psi versus the static reservoir pressure prior to CO2 injection, for the 2% of forecast CO2 volume injected to date.

· CO2 pressure response in five monitoring wells observed between 18 June 2020 and 18 September 2020, a one month lag from the commencement of CO2 injection at AT-5X.

· Enhanced production for the Herrera #2 Sand from two monitoring wells averaged 20 bopd as of 7 January 2021, with maximum productivity of 51 bopd enhanced oil production, for only the 2% of forecast CO2 volume injected to date.

Pilot CO2 EOR calibration of operational results to pre-Pilot desk-top forecasts

· Observed well productivities for the 2 monitoring wells (average 20 bopd; maximum 51 bopd) are significantly higher than the pre-Pilot desktop forecast of 15.81 bopd for a 62 psi increase in reservoir pressure.

· Displaceable CO2 injection volumes required to uniformly increase Herrera #2 Sand reservoir pressure in the AT-5X well by 62 psi is 1,553 MT, based on pre-CO2 EOR Pilot desktop forecasts, versus 443.58 MT injected into AT-5X to date.

Impact on pre-Pilot production forecast

· The Pilot CO2 EOR initial results, when calibrated against the pre-Pilot desktop production profile forecast for the Herrera #2 Sand, are currently predicted to be at the upper end of the P50 to P10 range (243 to 547 bopd respectively) for the three production monitoring wells included in the forecasts.

· CO2 pressure response in 5 monitoring wells during the Pilot CO2 EOR operations potentially warrants adding 3 additional production wells to the CO2 EOR expanded programme as insurance against any future operational issues requiring well workovers for producing wells and allowing for variations in reservoir performance over time in any particular production well.

Commercial considerations

· Injected CO2 volumes for the Pilot CO2 EOR, the key metric for minimising operating costs, are currently at the lower end of desktop estimates made prior to the commencement of operations.

· Combined with increased oil prices, changes to SPPT and early confirmation of enhanced production profiles potentially in line with the upper end of pre-Pilot CO2 EOR forecasts, enhanced near-term operating profitability is now considered to be achievable, subject to efficient operational and regulatory procedures based on the learning curve established during Pilot CO2 EOR.

· At WTI oil price of US$50/brl, projected EBITDA net-backs per barrel of oil for the P50 and P10 pre-Pilot CO2 EOR production profiles at plateau production are estimated to be in the range $15 - 25 per barrel. There are no new capital investment costs required.

Resources potential

· 459,000 barrels, representing a 15.9% recovery factor over 5 years based on STOIP of 2,887,000 barrels, are potentially recoverable using CO2 EOR from the Herrera #2 Sand in the AT-4 Block in Inniss-Trinity - the CO2 EOR Pilot has de-risked "the pending development" CPR definition of these resources.

· A further 410,000 barrels may be recoverable for other Herrera reservoirs in the AT-4 Block using CO2 EOR.

· CO2 EOR resources, pending development, for the entire Inniss-Trinity field were determined to be 6.8 million barrels (Best Estimate or equivalent to P50 case) by SLR Consulting (Ireland) Ltd.

Exclusivity of liquid CO2 supply in Trinidad dictates that these resources are best developed by the specialist services provided by the Company and not through licence or asset acquisition.

· Successful Pilot CO2 EOR has de-risked medium and long term CO2 EOR as a commercial proposition for Trinidad's 13 highest ranked mature onshore oil fields that have to date produced over 1.75 billion barrels of oil prior to their consideration as being suitable for CO2 EOR operations. Expansion of CO2 EOR is subject to increasing available CO2 off-take and the Pilot CO2 EOR provides the commercial model for a Finance Investment Decision by others in the future.

Forward programme

· Swab four wells to evaluate well condition and, if suitable, return to production, including potentially perforating the Herrera #2 Sand in one well that had not been previously produced from this reservoir.

· Timing of well workovers will depend on rig availability and any COVID-19 delays for the import of packers for downhole completions.

· Commence CO2 injection at new rates determined by the results of the Pilot CO2 EOR Project and maintain for up to twelve months to reach, by cumulative monthly growth, target plateau production for the Herrera #2 Sand in the AT-4 Block in the range 243 to 547 bopd, in alignment with pre-Pilot CO2 EOR desktop forecasts.

Business development

· The pre-Pilot CO2 EOR success has de-risked CO2 EOR in Trinidad and has provided the commercial, environmental and technical model for future projects.

· Capitalising upon this proven, fully integrated, working business model, expertise, and the exclusivity of liquid CO2 supply by introducing a fee-paying and profits-sharing service under the commercial model established by the Company for Inniss-Trinity CO2 EOR, is now a practical near-term objective of the Company. Five in-country operators and two international State oil companies have made initial exploratory approaches to assess suitability of CO2 EOR for some of their producing, mature, oil field assets.

· Enhanced Oil Recovery is likely to become a key component of work programme commitments required to extend Incremental Production Service Contracts. The successful CO2 EOR Pilot has demonstrated a practical and potentially more efficient  alternative to waterflood and has established the Company as the leading services provider for mobile CO2 injection for enhanced oil recovery. The successful development of the CO2 EOR business in Trinidad allows the business to be valued on the basis of its assets, invested project costs, existing contracts, goodwill and CO2 EOR operational experience.

Operational update - other projects

Guercif drilling programme

Drilling plans are advancing in anticipation of commencing drilling operations as early as possible in Q2 2021 in expectation of an accelerated international roll-out of the COVID-19 vaccine.

Coordination of operations and logistical requirements is being undertaken with other operators, specifically those planning to drill in Q2 2021 in northern Morocco, in order to safely accelerate the commencement of drilling operations following the relaxation of COVID-19 restrictions.

· Transfer of full ownership of the Maghreb gas pipeline to Morocco is set to take place in Q4 2021, creating a timely opportunity to develop a larger gas find at Guercif for export to the European gas market.

· The Company has already been introduced to a potential European gas buyer in order to better understand available pipeline capacity and timing requirements for delivery of "First Gas".

· The indigenous industrial gas market remains robust and under-supplied, relative to potential demand for expansion of gas sales, and attracts a premium price for gas.

· As announced on 7 December 2020, gross audited Best Estimate recoverable prospective gas resources for Miocene targets identified in the core area to be tested by MOU-1, all less than 10 kilometres from the Maghreb gas pipeline, has increased to 819 BCF. This represents an increase of 92% over the previous SLR Consulting (Ireland) Ltd. audited prospective  resources.

High Estimate gross prospective recoverable gas has increased to 1,823 BCF.

· Guercif offers the only near-term drilling activity with a rig in-country capable of exploiting the commercial opportunity offered by the wider Moroccan gas market, given the existence of material gas prospects, the easy access to infrastructure, and the potentially low and manageable development costs defined by cheap drilling and minimal gas processing requirements.

· Guercif project economics compare favourably with those for recent gas discoveries and planned gas developments onshore Trinidad, a jurisdiction that the Company is very familiar with. Based on realising the maximum potential of the industrial market for gas in Morocco, one BCF of gas in Morocco is valued at up to ten times the equivalent value of one BCF of gas onshore Trinidad. This reflects gas prices paid by private industry in Morocco up to five times those prices paid by State utilities for Trinidad gas; no taxation on operating profits for 10 years in Morocco; and lower capital and operating costs. Guercif gas is expected to be dry gas whereas recent Trinidad gas discoveries are rich in liquids and therefore have a significantly higher CO2 emissions footprint.

Offshore Ireland - Floating Storage and Regasification Unit  ("FSRU") and LNG

As announced on 7 December 2020, the focus of activities is to develop detailed documentation  with the Company's various working groups in order to provide all necessary information in the format required to allow the regulatory authorities to make an informed assessment of the potential contribution of the FRSU Project to Ireland's current and future requirements for Security of Energy Supply.

The Company will not provide any new information on this preparatory work until such time as preparations for the necessary public consultations have been agreed in dialogue with the appropriate regulatory authorities. This is to avoid any potential premature reporting of isolated information taken out of context that may have the capacity to prevent a balanced and informative public consultation process that takes into consideration the views of all stakeholders. 

On 14 January 2021 it was reported that the proposed LNG import facility at Cork using imported fracked gas from the USA had been scrapped.

On 5 December 2020, it was commented upon that electricity consumption in Ireland reached an all-time high of more than 5,100 MW on Thursday 3 December 2020. Consumption reached 5,112 MW for a period between 5pm and 6pm that day beating the previous record of 5,090 MW set in 2010.

Renewable energy, mainly wind, only accounted for 40% of supply on the day - the remainder was from gas.

Data centres were a factor in driving up demand on the day and there are plans to increase the growth of Data Centres in Ireland.

Growth in renewable energy, mainly offshore wind, will be required to accelerate far more rapidly in order to meet growing demand for electricity from Data Centres.

In this context, an extended transition period for reaching renewable energy targets is likely during which security of energy supply to meet intra-day peak electricity demands will be critical for under-pinning investment decisions in digital industries.  Diversity of gas supply and security of energy supply will have a pivotal role to play during a transition period. The FRSU Project is potentially a near-term solution to maintaining security of energy supply and diversifying the origin of gas supplies. It would utilise existing infrastructure and involve no large capital investment. The FRSU concept has the operational flexibility to address intra-day peak demand gas supply issues and provides short-term gas storage capability. The Company, as project manager, is developing detailed documentation with its working groups to be in a position to demonstrate the strategic and commercial value of the FSRU project and to create a marketable service.

 Paul Griffiths, CEO of Predator Oil & Gas Holdings Plc commented:

"The excellent results from the Pilot CO2 EOR project, despite a challenging operational environment due to COVID-19, has de-risked the case for CO2 EOR and established the Company as the ground-breaking leader in CO2 EOR expertise and delivery onshore Trinidad and within the wider Caribbean region. Results more than just support pre-Pilot CO2 EOR forecasts and create a solid foundation for expanding production growth over the next twelve months. Expanding our successful CO2 EOR business can be achieved by increasing production revenues and also by offering fee-paying services to other operators with profit-sharing entitlements.

Guercif drilling plans are targeting Q2 2021 for the execution of a potentially transformational exploration well coinciding with a time when the potential to establish a pivotal position in the Moroccan gas market has never been stronger.

Production growth, cash in the bank and restricted cash provides the Company with the funds required to execute its 2021 work programmes."

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 : 

Enquiries:

Predator Oil & Gas Holdings Plc Dr. Stephen Staley Non-executive Chairman Paul Griffiths  Chief Executive Officer	Tel: [phone] [e-mail]
Novum Securities Limited Jon Belliss Optiva Securities Limited Christian Dennis	Tel: [phone] Tel: [phone]
Flagstaff Strategic and Investor Communications Tim Thompson  Mark Edwards Fergus Mellon	Tel: [phone] [e-mail]

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 and sequestrating anthropogenic carbon dioxide 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 successful Pilot Enhanced Oil Recovery project using locally sourced liquid carbon dioxide for injection into and storage within the oil reservoirs ("C02 EOR"). Near-term expansion and production growth potential is focussed on upscaling the C02 EOR operations in the Inniss-Trinity oil field, subject to all necessary approvals. 

Predator is operator of the Guercif Petroleum Agreement onshore Morocco which is prospective for Tertiary gas in prospects less than 10 kilometres from the Maghreb gas pipeline.  A drilling programme, subject to the lifting of COVID-19 restrictions, targeting material prospective gas resources is scheduled for Q2 2021.

In addition, Predator also owns and operates exploration and appraisal assets in licensing options offshore Ireland, for which Successor Authorisations have been applied for, adjoining Vermilion'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.

 

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