Onshore oil acquisition

RNS Number : 4055Z

Stellar Resources PLC

06 February 2014

 



6 February 2014

Stellar Resources Plc

("Stellar" or the "Company")

UK onshore oil acquisition

Stellar today announces that it has entered into a Binding Heads of Agreement ("HOA") to buy a 7.5% equity interest in Horse Hill Development Ltd ("HHDL"), a special purpose company, which hold the rights to a 65% participating interest and operatorship, in licence PEDL137 onshore at Horse Hill Wood, in the UK Weald Basin in Surrey ("Horse Hill Prospect").

HHDL has an exclusive farm-in agreement with Magellan Petroleum (UK) Limited, a subsidiary of NASDAQ-listed Magellan Petroleum Corporation ("Magellan"), which currently own 100% of the 99.29 square kilometres (24,525 acre) Exploration and Development Licence No. 137 ("PEDL 137").  Under the agreement HHDL can earn a direct 65% participating interest and operatorship in the licence, under certain contractual conditions, through the drilling of the proposed 2,646 metres (8,680 feet) Horse Hill-1 exploration well by the end of August 2014. PEDL 137 expires on 30 September 2014 but Magellan can apply for an extension.

The Horse Hill-1 well is planned to test a number of conventional stacked oil targets at the proven productive Portland sandstone, Corallian sandstone and Great Oolite limestone levels.  Prospective recoverable resources totalling a mean 87 million barrels ("mmbbls") have been estimated; with an additional mean 164 billion cubic feet ("bcf") of recoverable prospective resources proposed within the deeper Triassic gas play.

David Lenigas, the Company's Chairman, commented:

"Stellar is keen to expand its portfolio of global resource investments and the recent developments in the UK have significantly increased interest in the sector.  The Horse Hill Prospect represents an immediate opportunity for the Company to be a key consortium participant in a significant conventional onshore oil and gas play."

About Horse Hill Prospect:

The Horse Hill Petroleum Exploration and Development Licence No. 137 (PEDL 137) is located in Surrey.

Magellan Petroleum (UK) Limited, a subsidiary of NASDAQ-listed Magellan Petroleum Corporation   ("Magellan"), currently own 100% of the 99.29 km² (24,525 acre) PEDL 137 ("Horse Hill") and has agreements with HHDL for HHDL to earn a direct 65% participating interest and operatorship in the licence, under certain contractual conditions, by the drilling of the proposed 2,646 m (8,680 ft) Horse Hill-1 well by the end of August 2014.

The newly defined Horse Hill Prospect covers an area of up to 16 km² in the south-west quadrant of PEDL 137. It is a tilted horst structure, similar to the Palmers Wood oil field structure which lies only about 20 km to the north-east. The Collendean Farm-1 well was drilled by ESSO in 1964 on the north-eastern edge of the Horse Hill structure and found good oil shows. Recent seismic re-interpretation shows the Collendean Farm-1 well was drilled on the wrong side of a significant fault.

The Horse Hill Prospect could contain up to an estimated 671 MMSTB oil in place, the majority in the Lower Portland sandstone which alone has an estimated upside oil in place potential of 284 MMSTB. The Collendean Farm-1 well does confirm reservoir presence with porosity of 27% and a net: gross of 0.95, with an expected oil recovery rate in the region of 30%. The reservoirs are sealed by the Purbeck anhydrite and calcareous mudstones. Potential probably also exists in the Corallian sands sealed by the overlying Kimmeridge Clay. Estimated total mean recoverable prospective resources of oil for the Portland sandstone, Corallian sandstone and Great Oolite limestone are 87 MMSTB.

Importantly, the Horse Hill Prospect is considered to have additional prospectivity of 456 Bcf gas in place (Mean 164+ Bcf recoverable prospective resource) in the proposed Triassic gas play. The Triassic sandstone is the expected reservoir with an anticipated porosity of in the order of 18%, net: gross of 0.58 and recovery factor of up to 70%. The stacked play potential of this prospect is, therefore, substantial.

The Horse Hill Prospect OOIP and OGIP and prospective resources are summarised in Table 1.

Table 1: Horse Hill Prospect estimated OOIP, OGIP and Prospective Resources.

Target Reservoir Oil	OOIP Upside Potential (MMSTB)	OOIP Mean (MMSTB)	Prospective Resources Mean (MMSTB )
Upper Portland Sandstone	116	57	17
Lower Portland Sandstone	284	147	44
Corallian Sandstone	67	33	10
Greater Oolite Limestone	204	104	16
Total Oil	671	341	87
Target Reservoir Gas	OGIP Upside Potential (Bcf)	OGIP Mean (Bcf)	Prospective Resources Mean (Bcf)
Triassic Sandstone	456	234	164

Competent Person's Statement:

The information contained in this report has been prepared by Magellan Petroleum (UK) Limited, and has been reviewed and signed off by Mr Mervyn Cowie BSc (Geology & Mineralogy), who has over 35 years' experience as a geologist. Mr Cowie is a Fellow of the Australian Institute of Mining and Metallurgy and is a competent person under Australian Stock Exchange Rules. The technical disclosure in this report complies with the SPE-PRMS standard.

Transaction details:

The consideration for the initial 7.5% interest in HHDL shall be paid as follows:

1.             Stellar will immediate pay HHDL £10,000 towards the cost of the Horse Hill-1 Well.

2.             On completion of all necessary legal documentation within 30 days, Stellar will make a further payment of £50,000 to HHDL towards the cost of the Well.

3.             Stellar shall bear a further total sum of £390,000 of cash calls for the drilling of the Well to be drilled on the Horse Hill Licence to own a 7.5% interest in HHDL.

Glossary:

Prospective Resources	those quantities of petroleum which are estimated, at a given date, to be potentially recoverable from undiscovered accumulations
oil-in-place/OIP	the volume of oil estimated to be in place
gas-in-place/GIP	the volume of gas estimated to be in place

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Enquiries:

Stellar Resources plc David Lenigas, Executive Chairman Donald Strang, Finance Director	[phone]
Cairn Financial Advisers LLP James Caithie / Paul Trendell Public Relations: Square 1 Consulting Ltd David Bick/Mark Longson	[phone] [phone]

 

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