PPP signs farm-in to Drill New Production Well

RNS Number : 4430U

Pennpetro Energy PLC

28 March 2023

 

Pennpetro Energy PLC

("Pennpetro" or the "Company")

Pennpetro signs Horse Hill farm-in to Drill New Production Well

London, 28 March 2023 - Pennpetro Energy PLC (LSE: PPP), an independent oil and gas company focusing on production and development in Gonzales County, Texas, USA, today announces that it has signed a binding term sheet ("Agreement") with UKOG (137/246) Ltd and Horse Hill Developments Ltd ("HHDL"), both subsidiaries of UK Oil & Gas plc (collectively " UKOG" ) to farm-in and drill the next infill oil production well at the Horse Hill Oil Field ("Horse Hill"), located about 2 km north of Gatwick airport.

The Agreement covers Horse Hill and its surrounding PEDL137 and PEDL246 licences ("Licences") covering an aggregate area of 142.9 km².

The Agreement's binding farm-in terms, which are subject to certain conditions as outlined below, cover the drilling of a new crestal infill well, designated Horse Hill-3 ("HH-3"), to be spudded after the completion of a Pennpetro funded high-definition 3D seismic survey. On completion of HH-3, Pennpetro will receive a 49% share of all production derived from Horse Hill-3 and future wells plus a 49% interest in the Licences. UKOG's subsidiaries will retain their current interests in all oil production from Horse Hill-1 ("HH-1") and HHDL will remain as the named Licence operator.

Tom Evans, Pennpetro's CEO, commented: "We see an excellent opportunity here for Pennpetro to participate in the next phase of developing the Horse Hill Oil Field. We look forward to moving ahead with the planned high-resolution 3D seismic survey as soon as practicable and then moving forwards to the next production well at Horse Hill."

About Horse Hill Oil Field

Following its discovery in 2014, Horse Hill was successfully production tested in the Upper Portland sandstone and underlying Kimmeridge limestone section from 2016 through to the start of long-term continuous Portland production in 2020. UKOG advise that, as of mid-March 2023, continuing oil production from HH-1 totals an aggregate of over 185,000 barrels of 35˚- 41˚ API sweet crude. Full planning and environmental consents are in place for four additional infill production wells.

A 2018 Xodus CPR for UKOG estimated a gross mid case P50 Portland oil in place ("OIP") of 30 million barrels, with a corresponding mid-case 2C recoverable Contingent Resource of 1.5 million barrels. The estimated mid case 5% recovery factor being stated as in accord with other analogous fields in the Weald Basin. It should be noted that the total HH-1 Portland production to date potentially leaves around 1.36 million barrels of the estimated mid-case recoverable Portland resource available to infill drilling and remaining HH-1 production.

In addition to the 132,000 barrels of 35-36˚ API Portland continuous production, approximately 53,000 barrels of 41˚ API sweet crude were produced from multiple zones within the Kimmeridge limestones during production testing, before being shut in to allow for longer term Portland production. In 2015 a Schlumberger report calculated an estimated mean OIP of 8.262 billion barrels lying within the entire Kimmeridge section underlying the Licences. Note: OIP should not be construed as either recoverable Contingent resources or Reserves. The Kimmeridge therefore remains a potentially viable secondary production target at Horse Hill.

About UKOG

UKOG, listed on AIM, is a forward-thinking energy company transitioning from oil and gas into the hydrogen energy space. Its portfolio includes the development of 40 billion cu feet of recoverable gas at Loxley, the UK onshore's largest remaining tested gas resource, stable oil production from Horse Hill and Horndean, plus the 305 km² Resan Licence in SE Turkey where the latest well targeting the shallow Pinarova structure, located beneath a recently discovered active surface oil seep, is expected to spud shortly. In May 2022 it announced its intention to build an integrated hydrogen hub, centred around the UK's largest planned underground salt cavern hydrogen storage facility, all strategically located in Southern England at Portland port in Dorset. It is a member of the Solent Hydrogen Cluster and is actively engaged with government on the future design and operating model of hydrogen storage.

Transaction Conditions Precedent

1.  The Transaction is conditional on the following conditions having been satisfied or waived on or before the date that falls six months from the date of this term sheet (the Longstop Date):

1.1.  the Parties entering into a farm-out [1] agreement in agreed form (Farm-out/Farm-in Agreement);

1.2.  if required, all applicable and necessary consents, authorities or approvals required from any applicable statutory or quasi-statutory body regulating the oil and gas industry in the United Kingdom having been obtained;

1.3.  HHDL having obtained all applicable and necessary approvals from its shareholders approving the Transaction;

1.4.  the board of HHDL having approved the Transaction;

1.5.  the board of UKOG having approved the Transaction; and

1.6.  Pennpetro having obtained all applicable and necessary approvals from its shareholders.

2.  Completion of the Stage 1 Farm-out/Farm-in is conditional on:

2.1.  the conditions in paragraph 1.1 having been satisfied or waived on or before the Longstop Date;

2.2.  Pennpetro having provided 100% of the funding required in order to complete the Seismic Survey; and

2.3.  the Parties entering into the following documents in agreed form: (i) assignment of Stage 1 Farm-out/Farm-in Interest; (ii) deed of assignment and novation in respect of the Stage 1 Farm-out/Farm-in Interest; (iii) deed of adherence in respect of the Licence Document.

3.  Completion of the Stage 2 Farm-out is conditional on:

3.1.  the conditions in paragraph 1.1 having been satisfied or waived on or before the Longstop Date;

3.2.  Stage 1 Farm-out/Farm-in having completed;

3.3.  Pennpetro having provided 100% of the funding required in order to complete the Farm-out Programme;

3.4.  the Farm-out/Farm-in Programme having completed and Horse Hill-3 having been drilled; and

3.5.  the Parties entering into the following documents in agreed form: (i) assignment of Stage 2 Farm-out/Farm-in Interest; (ii) deed of assignment and novation in respect of the Stage 2 Farm-out/Farm-in Interest.

  -ENDS-

This announcement contains inside information within the meaning of Article 7(1) of (i) Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014, as amended (the "EU Market Abuse Regulation") and (ii) the EU Market Abuse Regulation as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018.

ENQUIRIES:

Pennpetro Energy PLC: Tom Evans, CEO	[e-mail]
Brokers: Zeus Capital Simon Johnson	[phone]
Peterhouse Capital Limited Lucy Williams  Duncan Vasey	[phone] [phone]
Media and Investor Relations: Instinctif Partners   Galyna Kulachek Isadora Pegler	[e-mail] [phone]

NOTES TO EDITORS:

Pennpetro Energy is an independent oil and gas company focusing on production in the Gonzales Oil Field in Texas, USA. Shares in the company were admitted to the Official List of the London Stock Exchange by way of a Standard Listing on 21 December 2017 with the ticker symbol " PPP " . Its wholly owned subsidiary, Nobel Petroleum USA Inc. has a Participation, Development and Option Agreement and Joint Operating Agreement with Texas based Millennium PetroCapital Corporation over a 250,000 acre Area of Mutual Interest in Gonzales County, Texas, aimed at exploiting the prolific proven Austin Chalk oil and gas play.

Further information on the Company can be found at www.pennpetroenergy.co.uk

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^[1] Farm-out refers to UKOG disposing of a beneficial interest and refers to Pennpetro acquiring a beneficial interest .

 

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