Operational update

RNS Number : 4328I

Rose Petroleum PLC

09 December 2015

 

Rose Petroleum plc

("Rose" or the "Company")

Operational update

Rose Petroleum plc, the AIM-listed (AIM: 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.

US Oil and Gas Operations

Uinta Basin

The Company's half yearly report published on 28 September 2015 ("Interim Report") provided an update on the Company's well permitting process at the Uinta Basin, where the focus of activity is the Mancos formation.

By way of summary, in the first half of 2015 the Company began the permitting application process in relation to six Mancos wells. However, in response to the deteriorating oil price environment, the Board decided to flex its Mancos strategy in order to seek to deliver value while prudently conserving cash. To facilitate this, the Company began to focus on one single permit for the Federal 1-15 horizontal well ("1-15H").

At the time of the Interim Report the Company had submitted the Authority for Permit to Drill ('APD') for 1-15H to the Bureau of Land Management ('BLM').  However, whilst work on the Environmental Assessment ("EA") process started for 1-15H, the BLM is now requiring that all six of the originally proposed drill locations are captured under a single EA, rather than under separate EAs which was Rose's preference.  Completion of the permitting of the 1-15H, which remains the Company's key drilling target in the Mancos, could still be fast tracked ahead of the other locations, but is now expected to be received in time for the well to be spudded in the second half of 2016.

Given the current oil price environment, the Board believes that the extended timeline in the permitting process may work in favour of the Company. Should the oil price have improved prior to the drilling of the 1-15H, the Board believes the six drilling permits will provide the opportunity for a larger scale and more expansive drilling programme.  Following discussions with potential industry partners, which are ongoing, the multiple permitting programme is of more interest to those wanting to develop the acreage.

Paradox Basin

Rose's seismic contractor has completed all of its initial field work and Plan of Operation for the 3D seismic shoot. We are currently in the midst of the BLM staff department review of the proposed programme. Due to these current BLM processes and wildlife restrictions, it is currently forecast that the permit for the 3D shoot will be granted mid-year 2016 and all going well, it is expected that the 3D shoot will commence in September 2016.

Potential Acquisitions

As outlined in the Interim Report, the Board still believes the current sector environment provides an opportunity to acquire high quality assets in well-established producing basins. We hope to be able to update the market on such opportunities in Q1 2016.

Mining Operations

Copper and Molybdenum Porphyry Exploration, Mexico

During 2015, the Company has been active in preparing permit applications for drilling on the Tango project located approximately 70km east of the city of Mazatlán in southern Sinaloa. The Board is very pleased to announce that all permits required to commence drilling at the project have now been received, and the Board is now reviewing options for the commencement of a drilling programme. This will be the first drilling to evaluate the separate copper and molybdenum porphyry targets at the project.

These permits will also cover drilling the high grade vein structure at the San Agustin gold and silver mine.  It is hoped that, when drilled, this mine will, due to its close proximity, provide ore for the Company's SDA mill, which is located considerably closer to the mill than the Company's Mina Charay mine.

Gold / Silver Production - Mina Charay, Mexico 

Mine production has continued throughout the year from the Mina Charay mine in northern Sinaloa, Mexico. However, as the Interim Report mentioned, operational efforts have been overshadowed by the continued decline in metals prices. This has put a significant strain on the operation and against this backdrop, the Company has now decided to suspend operations at the mine. In the meantime, the Company will focus on toll milling third party ore at its 100% owned SDA mill in Acaponeta. The processing of third party ore has already commenced and further ore has been identified - this will enable the Company to keep the mill operating and expected to more than cover direct operating costs. This also reduces the risk profile of the operations as Rose will no longer have to fund the mining and transportation costs which were a considerable monthly outlay.

Matthew Idiens, CEO, commented "As mentioned in the Interim Report, we have implemented a radical cost cutting programme across the group to preserve our cash reserves in response to sector dynamics. The extended timelines around the permitting of the Uinta and the Paradox have been frustrating, but the cost cutting has ensured that we will have sufficient cash to see us through. We believe that for Rose to be self-funding a single well in the current oil price environment at this time, even with the projected economics of the Mancos, is ill-advised. We have ongoing discussions with third parties to potentially progress the Mancos and it is clear from these discussions that a multi-permitted well programme is more attractive to potential investors and, given the extended timeline, the programme could well benefit from an uplift in commodity prices. 

We are very pleased to have received the permits for the Tango project and we are considering our options to be able to commence drilling on that project as soon as possible. We believe the Tango project to be one of the most prospective porphyry targets we have explored."

Contacts

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

Matthew Idiens (CEO)	Rose Petroleum plc	Tel: [phone]
Jeremy Porter / Alex Brearley	Allenby Capital	Tel: [phone]

About Rose Petroleum

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 now covering approximately 260,000 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 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.

Rose 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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