Update on Shoats Creek Oil Project

RNS Number : 2779H

Red Rock Resources plc

27 November 2015

 

Red Rock Resources Plc

("Red Rock" or the "Company")

Update on Shoats Creek Oil Project

27 November 2015

Exercise of Option:

Red Rock Resources plc announces, further to its announcement of 28 October 2015, that it has exercised the option with Shoats Creek Development Corporation Inc ("SCDI"), to take a 20% Working Interest ("WI") in the planned development of the Lutcher More #21 ("LM#21") and Lutcher More #22 ("LM#22") wells at the Shoats Creek Field, Beauregard Parish, Louisiana. 

The Company will participate in the planned LM #21 and LM #22 wells, being two offset wells intended to test various sands of the Frio formation at approximately 5000' and currently planned for early 2016. The Company will also participate in associated common tank and production facilities.  Red Rock acquires a 20% WI and 14.4% net revenue interest ("NRI") in each of the project wells, as well as interests in two salt water disposal wells.

The Company anticipates that its share of cased and completed LM #21 and LM #22 wells as well as related production support facilities will cost between $500k and $600k and these costs will fall over the next four months or so. Red Rock has made and is making sales from its asset portfolio that will it anticipates enable it to meet the near-term costs of this drilling and production participation. Further announcements will be made shortly as these complete.

Other Terms:

SCDI will have a 18.75% back-in after payout (payout being the time when the Company has received an amount in payments for oil and gas sales minus operating expenses that is equal to the investment required to drill the wells and associated facilities) so that thereafter this percentage of the Company's working interest would revert to SCDI, and Red Rock would be left with a 16.25% WI / 11.7% NRI.

As part of the investment additional wells and re-entry opportunities may from time to time be proposed in the project area with the Company having the option but not the obligation to participate. 

Andrew Bell, Chairman, states: "LM#20 at Shoats Creek has been very successful and we believe that has considerably de-risked the planned LM# 21 and LM#22 wells. Success at these wells would offer the prospect of strong internal rates of return even at oil prices lower than those of today, making this an attractive investment.  Near-term oil production in the United States offers opportunities if projects with low production costs and risk can be found.

We continue to be entirely focussed on cost reduction, strategic disposals, and the generation of new revenue streams to the Company, in order to make this a net cash generating business."   

Background Note: 

This note repeats for convenience the summary information given in the announcement of 28 October 2015. 

Located in the United States in the state of Louisiana, the Shoats Creek Field was originally discovered by Sun Oil ("Sun") in 1956.  Situated on the US Gulf Coast, the Shoats Creek Field has produced over 2 MBOE primarily from numerous Frio and Cockfield interval sands between 5000 and 9000 feet deep.  The Frio is one of three major pay zones in the multi-reservoir field. 

The Frio was not initially developed by Sun until the late 1970s when commercial quantities of oil and gas were discovered.  From 1981 to 1983 Sun was producing 300 BOPD from their wells in the area.  Production waned over time and investigations showed that mechanical well bore issues revolving around tubing leaks were responsible.  Reduced production continued until 1984 when remaining wells were plugged and abandoned.  The reservoir has subsequently sat dormant for the past 30 years.         

Northcote Energy Limited in 2015 begun to re-develop Shoats Creek through infill drilling.  The initial efforts will be followed up with exploitation and step out locations based on production results, sub-surface data, and proprietary 3-D seismic.  The main risk in the effort is deemed to be mechanical rather than geological and the use of a stronger and more durable casing along with new techniques will be employed to ensure long and productive well operating lives.   

In early 2015 NCT drilled and tested the first well in the redevelopment effort, the LM #20, which was a twin to the historical LM #16 that had been a strong producer until it had to shut down prematurely as a result of mechanical problems. LM#20 reported tested rates of over 250 BO and 500 MCF of gas per day. The LM#20 encountered 10'-12' of pay with an estimated 20% porosity and was perforated over a small interval from 5018-23'.  Details on the progress of the LM #20 well into production and on the planned programmes at LM #21 and LM #22 may also be found in announcements by Northcote Energy Limited at http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/VGG6622A1057GBGBXASQ1.html?lang=en  

The technical information that is contained in this announcement has been reviewed by Mr. Kevin Green, a Petroleum Geologist who is a suitably qualified person with over 30 years' experience in assessing hydrocarbon reserves and who has consented to the inclusion of the technical information.

For further information, please contact:

Andrew Bell 0207 747 9990 or 0776 647 4849                            Chairman Red Rock Resources Plc

Scott Kaintz 0207 747 9990                                                        Executive Director Red Rock Resources

Roland Cornish/ Rosalind Hill Abrahams 0207 628 3396         NOMAD Beaumont Cornish Limited

Jason Robertson 0129 351 7744                                                Broker Dowgate Capital Stockbrokers Ltd.

Christian Pickel 0203 128 8817                                                 Media Relations MHP Communications

 

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