· MOU-1 step-out well MOU-2 to target 295 BCF net Contingent Resources
· Unrisked NPV US$592 million
· MOU-2 well pad construction will commence this month
· September – October drilling schedule
· Targeting 110 metre potential gross reservoir interval in Moulouya (“MOU-4”) Fan
· Planning for extended production test for early CNG sales and gas revenues
· Memorandum of Understanding for Gas Sales Agreement and leasing of CNG equipment being discussed
Predator Oil & Gas Holdings Plc (PRD), the Jersey-based Oil and Gas Company with operations in Morocco, Ireland and Trinidad is pleased to announce a drilling and operations update.
Guercif Drilling Programme
The Company is in the process of completing local permitting for the second of two alternative locations for the step-out well to the MOU-1 well which was completed for rigless testing in 2021. The final location will be agreed following the integration of reprocessed 2D seismic data that have recently been received. Civil engineering works will commence this month to construct the well pad for the step-out well now designated MOU-2.
Long lead equipment including well heads, casing, cement, chemicals, drill bits mud motors and downhole tools as well as mud and cementing services have been sourced out of the UK, France, USA, Canada, Egypt and the Netherlands.
The well is anticipated to be drilled and completed for rigless testing between September and October this year. The drilling window will be updated as well inventory arrives in Morocco from overseas. Star Valley Rig 101 is prepared to commence drilling operations on instructions from the Company.
The geological well programme and drilling programme are currently being updated.
The well will test the Moulouya Fan, previously designated the “MOU-4 Fan”. The extreme western feather edge of the Moulouya Fan was penetrated in MOU-1 located approximately 8 kms. to the southeast of the new step-out well. MOU-1 established the presence of gas in the target section and confirmed an over-pressured mudstone seal. Post-well seismic ties validated a seismic amplitude signature for the MOU-4 Fan covering an area of greater than 30 km².
MOU-2 will test the core of the Moulouya Fan in a shelf slope position where seismic signatures indicate the presence of major channel systems. The well will provisionally be drilled to 1,500 metres TVD KB and is expected to encounter the top of the Moulouya Fan between 1,130 and 1,200 metres TVD KB. At this location the well will be targeting a gross potential Moulouya Fan reservoir sequence of 110 metres. The potential for multiple gas-water contacts may exist as is the case in the Anchois discovery and appraisal wells. However at this well location there is little seismic evidence for compartmentalisation of the target reservoir section.
The well has been designed to test an independent structural closure within the Moulouya Fan covering up to 11 sq. km., twice the area of the original Anchois discovery well. Vertical relief on this closure is approximately 75 metres and is sufficient to test for lowest known gas in the 110 metre gross potential reservoir interval. Gas deeper than structural closure will help establish the validity of a single stratigraphic trap covering up to 30km² defined by the seismic amplitude signature tested in MOU-1.
MOU-2 is targeting net Best Estimate resources to the Company of 295 BCF (Table 1) based on the independent SLR Consulting Ireland Ltd. (“SLR”) Competent Persons Report (“CPR”), (February 2020 and January 2022 “MOU-4” updated). Gas deeper than the mapped structural closure tested by MOU-2 would support the SLR High Estimate of gas resources net to the Company of 708 BCF.
Table 1 Prospective and Contingent (“MOU-4” now Moulouya Fan) Resources Guercif Permit
Source – SLR Consulting Ireland Ltd
Supportive desktop studies
Recently completed post-well geochemical, sedimentological and biostrat studies on well cuttings have confirmed that the distal part of the Moulouya Fan was deposited in a deep marine setting. The presence of very fine grained sandstones was established as indicated as interpreted from the high resolution NuTech post-well log analysis. These are moderately well sorted and have undergone very little compaction. At deposition the independent studies indicated that these sediments were likely to have 35 – 40% porosity and permeabilities between 2000 and 5000 Md. Lack of compaction and consolidation suggests that poroperm conditions would not have been significantly impacted through burial and therefore good reservoir quality would potentially be retained, as supported by the post-well NuTech log analysis.
The new desktop studies will be used to update and refine the MOU-1 testing programme.
Geochemical source rock studies unexpectedly showed that the section between 800 and 1500 metres frequently had Total Organic Carbon content of between 0.85 and 1% raising the possibility of not only a thermogenic dry gas source but also a biogenic gas source.
Potential for early monetisation
Plans are being advanced to place MOU-2 in a success case on an extended production test for an initial CNG development. This does not require the issue of an Exploitation Concession licence, which can be applied for in due course following the extended production test.
Initial gas sales are likely to be constrained to a plateau of 10 mm cfgpd (using MOU-2 and MOU-1). Reservoir characteristics are encouraging and well deliverability may potentially be significantly higher than this plateau. For early monetisation and the generation of near-term gas sales revenues a cautious approach is being adopted to ensure that any exposure to shortfall in gas deliveries due to operational reasons is manageable through a flexible Gas Sales Agreement to end users with an alternative LPG back-up.
CNG sales can be upscaled with additional development wells to reach the next threshold production target of 50 mm cfgpd.
First CNG gas sales are being targeted for within 6 months of the completion of rigless testing for MOU-1 and MOU-2. Timing will depend on maintaining a momentum in the logistical supply chain.
To further its commercial objectives the Company is in discussion with the Moroccan industrial market to secure a Memorandum of Understanding for a Gas Sales Agreement that will be implemented upon the completion and announcement of the MOU-2 and MOU-1 rigless test results.
To assist the financing of the CNG development the Company is seeking to have in place before MOU-2 is drilled a Memorandum of Understanding with an international CNG utility company to finance through a leasing agreement the initial CNG development. The lack of fixed pipeline development costs; accelerated timescale to first gas; and higher gas prices achieved in the Moroccan industrial market versus the power sector generates the scale of revenues necessary to make commercially attractive such leasing agreements. A Memorandum of Understanding for a Leasing Agreement would be implemented upon the completion and announcement of the MOU-2 and MOU-1 rigless test results.
Potential scoping revenues and indicative valuation
The SLR CPR (January 2022) gives an unrisked NPV per BCF of discovered gas of US$1.99 million. This is based on a large-scale gas-to-power development using a gas price of US$9/mcf and results in a low net-back of just US$1.99/mcf.
Conservatively therefore a 10 mm cfgpd CNG project would generate a NPV of US$7.26 million annually rising to US$36.3 million through scaling up to 50 mm cfgpd.
SLR recognise that a 10 mm cfgpd CNG development could potentially generate significantly higher revenues based on a CNG operating cost of US$2.3/mcf and a net CAPEX cost of US$12.21 million and an average gas sales price of US$11/mcf, before allowing for recent cost and gas price inflation as a result of the European energy crisis.
The SLR CPR gave an unrisked NPV of US$592 million for the net Best Estimate resources of 295 BCF being targeted by the upcoming MOU-2 well subject to proving commerciality. The CNG development case provides the optimum scenario for proving and accelerating commerciality whilst the gas market remains influenced by the European energy crisis.
At an exchange rate of US$1.19/GBP1.00 this represents an unrisked 146.5 pence per share based on the Company’s fully diluted share capital of 339,582,281 shares to support the risk-reward drilling proposition.
Mag Mell FSRU LNG and Ram Head gas storage
The Company is commissioning a report through SLR Consulting Ireland Ltd. to:
– develop an outline pipeline site survey plan for the existing Kinsale Head gas export pipeline to shore and to include the foreshore;
– prepare a draft investigative Foreshore Licence Application Form with accompanying map;
– apply to the Foreshore Unit of the Department of Housing, Local Government and Heritage to request a pre-application consultation meeting.
This forms part of the Company’s ongoing process to maintain heightened public and regulatory awareness of the importance of protecting strategic gas infrastructure from premature decommissioning as the energy crisis in Europe evolves. This is vital to diversify Ireland’s gas imports and to assist with the development of gas storage. Currently Ireland has no gas storage facilities.
CO2 EOR Trinidad
The Company is focussed on leveraging it’s CO2 EOR expertise in Trinidad whilst preserving its cash resources in the near-term to advance drilling activity in Morocco.
Working in cooperation with Lease Operators in the PS-1 Block the Company has selected four additional sites for CO2 EOR operations. This will be the key area of focus for the remainder of 2022.
The Company is seeking to acquire an attractive green hydrogen opportunity to develop once the Moroccan drilling and testing programme for 2022 has been completed.
Cash resources are committed at present to the MOU-2 drilling programme but options to secure exclusivity over early stage projects in private companies will be considered if the Company believes that it can add value through its listed status to strengthen marketing of green hydrogen to potential end users.
Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented :
“Despite logistical challenges caused by the situation between Russia and Ukraine, we are pleased that we remain on track to drill the follow-up well to MOU-1 during September and October. The Guercif licence area has always represented a unique risk-reward proposition for the Company and its shareholders. This has been reinforced in the last few months as the European energy crisis has taken a firm stranglehold.
We have the means to drill a sizeable onshore gas target but most importantly a clear plan for early monetisation though a CNG development that does not require any new gas pipeline infrastructure or any long delays in accessing existing infrastructure.
The Moulouya Fan Project is a project made for the current shortage of gas scenario in Morocco and Europe. Sometimes global events align to favour those that were prepared to take risks in an area that was for so long neglected and overlooked. Recognising missed opportunities is a key driver for our Company’s management as it creates our competitive edge.”
This announcement contains inside information for the purposes of Article 7 of the Regulation (EU) No 596/2014 on market abuse
For more information please visit the Company’s website at www.predatoroilandgas.com :
Predator Oil & Gas Holdings Plc
Paul Griffiths Executive Chairman
Lonny Baumgardner Managing Director
Tel: +44 (0) 1534 834 600
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