Oil & Gas and Operational Update

RNS Number : 8409D

Rose Petroleum PLC

03 February 2015

 



Rose Petroleum plc ("Rose" or the "Company")

Successful Mancos drilling programme and potential conventional hydrocarbon discovery in Utah

Operational update across multi-commodity portfolio

Update in relation to Wate Mining Company

Rose Petroleum plc, the AIM-listed (Ticker: ROSE) natural resources company, is pleased to provide an operational update on the current activities taking place within both its oil and gas and mining divisions.

Oil & Gas highlights (USA)

·    State 1-34 Mancos Well, Uinta Basin, Utah

o Successfully drilled well to 3,200 feet ("ft") total depth ("TD") and ran production casing to TD

o Mud logs indicate presence of oil & gas throughout both the Mancos Shale ("Mancos") and several of the deeper conventional reservoirs below the Mancos

o 84ft of potential net oil pay in the conventional reservoirs below the Mancos across a 600ft total interval

o Two whole cores were cut in the Mancos which are currently being analysed

o Additionally, 50 rotary sidewall cores were taken based on the open hole logs and mud log which are also currently being analysed

o Plan to complete the conventional reservoirs while waiting on the Mancos core analysis and will then prepare to drill a horizontal lateral well in the Mancos

·     State 16-42 Paradox Well, Paradox Basin, Utah

o  The casing cementing programme conducted by the well's previous operator has been deemed inadequate to successfully complete the testing programme on this well

o  Completing 3D seismic survey now the priority prior to new well location selection

Mining highlights

·    Mina Charay Mine, Mexico

o Encouraging recoveries averaging 79.3% Au and 61.7% Ag from pilot run of development ore through SDA Mill

o On track to reach full forecast production of 100 tonnes per day in February 2015

o Cash flow expected from March 2015

·    TC Copper Project, New Mexico, USA

o Decision to terminate drill programme as a result of no encounter of porphyry-style alteration of mineralisation

o Entire cost of operations and overhead borne by JV Partner Lowell Copper

Matthew Idiens, Group CEO, commented:

"We are highly encouraged by the initial results for the State 1-34 well in both the Mancos, which is our primary objective, as well as the potential discovery in the conventional reservoirs below the Mancos.  The Mancos core analysis will be conducted over the next few months and we look forward to updating the market as and when the results become available.  In the meantime, we will begin the completion programme in the conventional reservoirs in March, which will keep us on target for initial oil production in H1 2015 as expected and supplement our Cisco Dome Field gas production.  Importantly we are operating in a low cost environment which we anticipate will translate into an economic oil reserve development even in the current oil and gas pricing environment.  At this time, and with the apparent success of the State 1-34 well, we believe it is prudent to cease operations on the State 16-42 Paradox well considering the complications with the wellbore's cement.  As this was only ever intended to be a vertical completion to gather reservoir data for future horizontal wells, our funds will be better utilised in the Mancos area until we have the 3D seismic data available to select our first horizontal well location in the Paradox Basin.

"The TC copper project has been a free carry for Rose and the termination of the drill programme allows us to focus our mineral exploration efforts on our Tango copper and molybdenum concessions located northeast of the town of El Rosario in southern Sinaloa, Mexico, which we plan to drill as soon as possible.

"Revenue contributions are expected to commence in March from our gold production in Mexico, where we are nearing the high grade material identified by drilling and are on track to produce our targeted level of production this month."

US Oil & Gas operations

Rose Petroleum has over 245,000 acres in the Paradox and Uinta Basins in Utah which target the Mancos Shale and the Paradox Clastics formations.  Ryder Scott Company calculated mid-case gross Un-risked Recoverable Prospective Resource Estimates for Rose's existing leasehold (excluding newly acquired assets and potential conventional targets) of 1.83 billion barrels of oil and 6.45 trillion cubic feet of gas. 

State 1-34 Mancos Well, Uinta Basin, Utah

As announced on 13 January 2015, the larger rig was moved on site at the State 1-34 Mancos well and the Company has now successfully drilled to total depth of 3,200 ft.   In addition to the analysis of the Mancos, the drilling programme was designed to explore the potential of conventional reservoirs below the Mancos.  Preliminary data from the well is encouraging in both the Mancos as well as the conventional reservoirs.

A mud log was run during the drilling of the well and indicates the presence of oil and gas throughout the entire Mancos interval, which is also indicated in the whole core.  Additionally, open hole well log analysis indicates the potential for several conventional sand reservoirs below the Mancos to be productive.  The mud log also indicated rich shale with good Total Organic Contents ("TOC") ranging from 2% to 10%.  Additionally, generated oil in place and movable oil were also measured with positive indications across the Mancos.

As planned, two whole cores have been cut within the Mancos and are now being analysed at Weatherford's laboratory in Denver.  The cores have excellent natural fracturing indicating good brittleness and promising hydrocarbon indications.  Photos of the core can be seen on the Company website by clicking on the following link:

http://www.rosepetroleum.com/gallery/gallerycores

Additionally, 50 rotary sidewall cores have been taken elsewhere in the Mancos and in the conventional reservoirs. The locations of the sidewall cores were selected from the mud logs and open hole logs as being zones of interest.  The analytical work on the whole cores is expected to be completed in Q2 2015 and will be used to orient the direction of a horizontal lateral well in the Mancos and to optimise fracture stimulation design of the horizontal wellbore.

As outlined previously, the initial drilling programme was designed to gather data from the Mancos as well as test conventional targets below the Mancos.  Based on the mud logs and open hole logs, the preliminary results for the Mancos are very encouraging.  Additionally, based on preliminary evaluation of the well logs, there is potential for 84ft of net oil pay in the conventional reservoirs below the Mancos across a 600ft total interval.  Production casing has been run in the well and completion operations of the conventional pay intervals will begin in March 2015. 

Ryder Scott Company calculated mid-case gross Unrisked Recoverable Prospective Resource Estimates for Rose's Mancos assets of 709 million barrels of oil ("MMBO") and 4.26 trillion cubic feet of gas.  With this kind of reserve potential and the positive initial data from the State 1-34 well, the Mancos Shale is the Company's initial primary focus, along with the Paradox Clastics formation in the Paradox Basin which also offers significant reserve potential.   However, based on well log analysis of the conventional reservoirs below the Mancos in this well, it appears we may have also discovered several productive conventional reservoirs.  We are now targeting completion of these reservoirs while we are waiting on the results of the Mancos core analysis.  The conventional reservoirs below the Mancos have produced historically throughout the area from over 400 wells.  Based on 2-D seismic and existing well control, it appears that there is a 600 ft oil column trapped on a fault-bounded structural closure of approximately 2,000 acres in size. 

Additional details on both the Mancos and the conventional reservoirs will be made available in the coming weeks as the Company receives additional data from the whole core and sidewall core analysis.

Paradox Basin - State 16-42 Paradox Well, Utah

The State 16-42 well was drilled by Fidelity Exploration and Production Inc. ("Fidelity") in 2009 and subsequently shut-in.  It was then acquired by Rose as part of its project acquisition in March 2014.  Rose planned to re-enter the well and carry out a multi-zone completion programme consisting of seven intervals and a total of 19 individual zones to test the multiple potential pays in the well.

After attempting to complete three of the seven zones, it has been determined that the cement between the casing and formation is not of adequate quality to allow the zones to be successfully completed.  Therefore, insufficient data can be gathered from this well to be of significant value and the Directors consider that the funds allocated for this programme will be better utilised towards the development of the apparent oil discovery of the conventional reservoirs in the State 1-34 well.

The inability to successfully complete the 16-42 well in no way impacts the prospective nature of Rose's Paradox holdings, which currently has un-risked prospective recoverable hydrocarbon resources of 1.1 billion barrels of oil and 2.2 trillion cubic feet of gas.  The Company looks forward to having the 3-D seismic survey shot and selecting its first well location. It is important to note that since 2012 the basin has been successfully exploited by Fidelity using 3D seismic to select drilling locations, targeting locations with significant natural fracturing. It has been the use of 3D seismic that has "unlocked the code" for the basin for Fidelity and therefore we will be choosing our first well location once we have completed the 3D survey.

Mexico Gold/ Silver mining and milling operations

Mina Charay Gold-Silver Project, Mexico

The pilot run of 350 tonnes of development ore from the Mina Charay Mine has been processed through our SDA mill with encouraging results. Recoveries were encouraging and averaged 79.3% gold ("Au") and 61.7% silver ("Ag").  The pilot run was done with material from the initial openings into the vein with assays reflecting grades of 3-5g/T Au and 100g/T Ag, which is encouraging given the early stage of production.  Mining is advancing towards the higher grade vein material identified by historic drilling from which the in-house resource of 29,000 ounces ("oz") of gold and 173,000 oz of silver contained in 90,000 tonnes grading 10 g/T gold and 60 g/T silver was calculated.  Mine development is on track to reach forecast production in February 2015, with revenue contribution expected to commence in March 2015.

Porphyry Copper Exploration

TC Copper Joint venture, New Mexico, USA

A single combination rotary/diamond drill hole was completed along the well-known Hillsboro-Chino-Tyrone-Lordsburg-Bisbee porphyry copper belt.  Hole TC-14-001 was completed to the depth of 1,385 ft and the contact between the Tertiary and lower plate Precambrian crystalline rocks, which was the drilling target, was encountered at the depth of 1,205.9 ft.  Porphyry-style alteration or mineralisation was not encountered in the underlying Precambrian although the drilling did achieve the goal of reaching and testing these lower plate rocks.

The TC project was operated under a joint venture agreement with TSX-listed Lowell Copper Ltd. ("Lowell Copper") as announced on 4 March 2014.  The entire cost of operations and overhead was borne by Lowell Copper, so the project was a free option for our wholly-owned subsidiary AVEN Associates LLC ("AVEN").  Lowell Copper is in agreement with AVEN's assessment of the drilling results and its decision to terminate the drilling programme as a result of the lack of any porphyry-style alteration or mineralisation.

VANE Minerals (US) LLC, USA- Uranium

Wate Mining Company LLC

The transaction to dispose of the Company's interest in the Wate Mining Company LLC did not close as planned on 16 January, for reasons considered by our wholly owned subsidiary VANE Minerals (US) LLC ("VANE") to be outside the terms of the purchase and sale agreement. Energy Fuels Resources Inc. and VANE are in ongoing discussions in an attempt to resolve the situation.

John Blair (BSc Geology and MSc Geophysics), Director of Oil & Gas for Rose Petroleum plc, who meets the criteria of a qualified person under the AIM Rules - Note for Mining and Oil & Gas Companies, has reviewed and approved the technical information contained within this announcement relating to Rose's oil & gas division.

Kristopher K. Hefton, BSc Geology, Chief Operating Officer Rose Petroleum plc, who meets the criteria of a qualified person under the AIM Rules - Guidance for Mining, Oil & Gas Companies, has reviewed and approved the technical information contained within this announcement relating to Rose's mining division.

**ENDS**

For further information please visit www.rosepetroleum.com or contact:

Matthew Idiens (Group CEO)	Rose Petroleum plc	Tel: [phone]
John Blair (CEO)	Rose Petroleum (US) LLC	Tel:  [phone]
Jeremy Porter	Allenby Capital	Tel: [phone]
Alex Price	Allenby Capital	Tel: [phone]
Elisabeth Cowell	St Brides Partners Ltd	Tel: [phone]
Lottie Brocklehurst	St Brides Partners Ltd	Tel: [phone]

About Rose Petroleum

Rose Petroleum plc (AIM Ticker: ROSE) is focusing on developing its oil & gas portfolio, while seeking to create value from its existing mining, milling and porphyry copper exploration portfolio.  

In March 2014, Rose signed a farm-in agreement under which its newly formed subsidiary, Rose Petroleum (Utah) LLC, can earn 75% of certain oil, gas and hydrocarbon leases covering approximately 230,000 acres in Grand and Emery Counties, Utah, USA, within the Paradox and Uinta basins.

In May 2014, Rose published the results of its reserve report prepared by Ryder Scott Company on the Mancos and Paradox Oil & Gas Projects. Un-risked Prospective (Recoverable) Hydrocarbon Resources on a Mean Case basis for the collective total Mancos Shale and Paradox Formation combined was 1,825.07 MMBO (million barrels of oil) and 6,447.87 BCFG (billion cubic feet of gas).

In June 2014, the Company successfully raised £6.5m by way of an oversubscribed conditional placing and subscription to develop the Mancos and Paradox assets in Eastern Utah, and the completion of a further £3.5 million fundraise was announced on 5 December 2014.

In October 2014, Rose acquired 100% of the assets of a privately owned SEP - Cisco Dome, LLC and various other associated entities for US$1.5 million in cash. The acquired assets included 11,000.02 gross / 8,250.02 net acres of highly prospective Mancos acreage, a gas compression station and gas processing plant as well as 17 producing wells and 35 shut-in wells.

Management intends to build on these projects to establish a balanced international asset portfolio. For further information please consult the Company's website: www.rosepetroleum.com

 

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