East Denver Natural Gas Purchase Agreement

RNS Number : 3916L

Highlands Natural Resources PLC

19 April 2018

 

19 April 2018

Highlands Natural Resources plc ('Highlands' or 'the Company')

East Denver natural gas purchase agreement and operational update

Highlands, the London-listed natural resources company, is pleased to announce it has secured a natural gas purchase agreement (the "Agreement") with a local pipeline operator for its East Denver Project in Colorado.  The monetisation of natural gas and associated liquids from the project represents a further revenue opportunity for Highlands, adding further upside potential to its assets.

Highlands also updates the market on its progress at East Denver and on the latest success of DT Ultravert to meaningfully enhance production in horizontal shale wells.

Overview

·   Highlands to monetise natural gas at East Denver in H2 2018 following the execution of a natural gas purchase agreement

·    Latest production figures place Highlands' East Denver wells in the top 3% of all Niobrara wells in Colorado and has generated net revenues of US$3.8 million to 31 March 2018

·    The executed gas purchase agreement has paved the way towards the finalisation of third-party funding to drill and complete additional wells in East Denver. Negotiations are well advanced

·    Highlands has spud conductor casing on six new wells on the northern Drilling and Spacing Unit ("DSU") ensuring that the Company remains in compliance with previously announced drilling timetables

·    DT Ultravert technology proven to enhance oil production in horizontal shale wells in areas previously impacted by well bashing

o  Compelling production and flowback data demonstrates clear economic case for application in horizontal and vertical wells

·     A corporate update presentation will be available on the Company's website later today

Robert Price, Highlands' Chairman and CEO, said: "This natural gas purchase agreement will be highly accretive to the East Denver project, which has already demonstrated its ability to perform at a remarkable level of productivity and efficiency. This, together with the superior production rates we have announced in comparison to other wells in the region, will position us to conclude a third-party financing to advance our drilling programme in the near term.

"Regarding DT Ultravert, I could not be more excited to update the market on our successful deployment of the patented anti-bashing technology in horizontal wells. The Permian Basin is the single most active shale play in the United States today and I feel confident that these technical and commercial results will catch the attention of our peers and colleagues across the shale oil and gas industry. DT Ultravert has now proven its ability to protect and enhance value for shale well operators in multiple environments."

East Denver Gas Midstream Solution

Highlands has secured a natural gas purchase agreement (the "Agreement") with a local pipeline operator, allowing Highlands to monetise natural gas and associated liquids through efficient pipeline infrastructure. The first gas deliveries under the Agreement are expected in the second half of 2018.

The Agreement adds valuation upside to Highlands' assets by allowing the monetisation of both oil and natural gas production volumes on a long-term basis and therefore represents an important step forward in the development of East Denver, as it paves the way to finalizing Highlands' funding for drilling and completing additional East Denver wells.

Until commencing pipeline sales, Highlands will continue to process natural gas liquids ("NGLs") on-site at East Denver using the Company's dedicated Mechanical Refrigeration Unit ("MRU") gas processing system. The MRU has been an effective interim solution for extracting valuable NGLs from produced gas.

East Denver Production Results and Operational Updates

The Wildhorse and Powell wells have produced a cumulative of more than 190,000 barrels of oil equivalent (BOE) as of 31 March 2018. Based on  five month cumulative oil production, Highlands' wells rank in the top 3% of all Niobrara wells in Colorado. Moreover, the wells have sustained production with minimal down time since flowback commenced in the fourth quarter of 2017, which is a testament to Highlands' dedicated engineering and operations teams.

Highlands' share of net revenue from these two wells has now reached approximately US$3.8 million after subtracting taxes, royalties and partners' interests through 31 March 2018. Significantly Highlands continues to achieve excellent commodity pricing differentials, resulting in proceeds of approximately $65/Bbl for oil and $0.70/gal for NGLs based on current commodity prices.

In preparation for the next phase of drilling, Highlands has spud conductor casing on six new wells on the northern DSU and will remain in compliance with the amended drilling timelines under the 16 December 2016 Farm-In Agreement.

DT Ultravert Permian Basin Deployment

Highlands conducted a successful parent well protection deployment of DT Ultravert in two horizontal wells in the Permian Basin. Flow-back and production results were collected throughout the first quarter of 2018, which Highlands and the operator have now analysed.

DT Ultravert was deployed during the fourth quarter of 2017 in two parent wells with a history of bashing and depletion-impaired child wells. The data shows that the DT Ultravert-enhanced child wells achieved an average of 15% more oil production over the first 30 days than child wells completed without DT Ultravert. Across the dataset, Highlands observed a range of 10% to 19% production uplift for DT Ultravert-enhanced child wells vs. non-DTU child wells. These results establish a clear economic case for DT Ultravert use in horizontal shale wells, as a 15% production enhancement can amount to millions of dollars in preserved value over a well's lifetime compared with DT Ultravert deployment costs in the hundreds of thousands of dollars.

***ENDS***

For further information:

Highlands Natural Resources plc      

Robert Price    [phone]

Cantor Fitzgerald Europe      

Nick Tulloch    [phone]

David Porter

Redleaf Communications

Elisabeth Cowell

Ian Silvera

Fiona Norman [phone]

Notes to Editors

Highlands (LSE: HNR.L) is a London-listed natural resources company with a portfolio of high-potential oil, gas and helium assets and technologies. The Company's core projects include:

·     East Denver Niobrara: a horizontal oil and gas project targeting the Niobrara shale formation in a well-studied area of the Denver Julesburg Basin. The project currently produces from two wells, the Wildhorse and Powell, with additional drilling planned in 2018.

·     DT Ultravert: a re-fracking and parent well protection technology with four patents allowed and additional patents pending in the United States and internationally. Highlands is advancing commercial conversations with a range of oil and gas operators and service providers to commercialize DT Ultravert technology.

·     Helios Two: a 220,000+ acre helium and natural gas prospect in SE Montana with drilling and assessment operations ongoing.

 

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