Acquisition of Leases Prospective for CO2
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25 June 2018
Highlands Natural Resources plc ('Highlands' or 'the Company')
Acquisition of Leases Prospective for CO2
Highlands, the London-listed natural resources company, is pleased to announce that it has made application to acquire leases over 46,000 acres of land in Apache County, Arizona, which the Board believes to be prospective for commercial volumes of carbon dioxide ("CO2"). Grant of the leases is subject only to ratification by the State and Highlands expects this within the next two weeks.
The area sits adjacent to land which was identified as a target for future CO2 production by Kinder Morgan, one of the leading suppliers of CO2 to the Permian Basin. Plans had been developed to construct a pipeline from Apache County, Arizona to the existing pipeline network that provides CO2 for the Permian Basin. Pricing for CO2 in the Permian Basin is usually linked to the price of WTI oil and when it declined in 2015, Kinder Morgan announced that it would not pursue the build. The Company's acquisition and maintenance of the leases will be at minimal cost and therefore the Board believes that the recent sustained increase in oil prices signals the right time to acquire the C02 leases.
CO2 is used in a broad range of applications, as described below, and the Board will commence discussions in due course with a range of potential end users to fund any drilling activity. Producers are often able to negotiate take or pay contracts and pricing floors to ensure recovery of their investment in CO2 supply sources. Of most immediate relevance to Highlands, CO2 is used in the oil and gas industry to extract in-place oil from pressure depleted wells. Importantly, the United States Department of Energy estimates that there are up to 83 billion barrels of technically recoverable oil in the United States Lower 48 states via CO2 enhanced oil recovery ("EOR").
Through its DT Ultravert technology, Highlands is building a reputation as an innovator in the well protection and productivity space. With this in mind, this carbon dioxide project, together with its recently announced nitrogen discovery, could significantly bolster the Board's portfolio of well productivity solutions and assets.
Robert Price, Highlands' Chairman and CEO, said: "Highlands has a growing portfolio of assets which have the potential to significantly enhance well productivity. This is an exciting project in an area identified by one of the region's leading producers as being prospective for CO2 and we look forward to evaluating it further. In the meantime we remain focused on increasing our cash flow through completion of the six additional wells currently being developed at our East Denver project, and on commercialising DT Ultravert through the acquisition of assets which have the potential to lower the cost for end users."
There are numerous other applications for carbon dioxide:
1- Carbon dioxide is used as a cryogenic agent for cooling, chilling, and rapid freezing of food and beverages during transportation
2- It is a key component in brewing and fizzy drinks
3- It has several agricultural applications, including the meat industry and as a growth stimulant for plants
4- It is also used in medical oxygen supplies as a respiratory stimulant
5- Carbon dioxide is used as a shielding gas in welding
6- It plays an integral part of rubber production
7- Carbon dioxide is also a main component of fire extinguishers
***ENDS***
For further information:
Highlands Natural Resources plc
Robert Price +1 (0) 303 322 1066
Cantor Fitzgerald Europe
Nick Tulloch +44 (0) 20 7894 7000
David Porter
Redleaf Communications
Elisabeth Cowell
Fiona Norman +44 (0) 20 3757 6880
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:
· Colorado Shale: having developed a horizontal oil and gas project targeting the East Denver Niobrara shale formation, Highlands retains a 7.5% carried interest in the project, which is fully funded and operated by Highlands' partners. East Denver is currently producing from two wells, with six additional wells currently drilling, and up to 24 wells can be drilled in total. Highlands is now developing plans to advance its 2,721-acre shale project in the Denver Julesburg Basin west of Denver.
· 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, potentially supported by its own 800-acre low-cost nitrogen discovery in Kansas.
· Helios Two: a 220,000+ acre helium and natural gas prospect in SE Montana with drilling and assessment operations ongoing.
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