December 2014 Quarterly Cashflow and Activities Report
Brisbane, Jan 29, 2015 AEST (ABN Newswire) - Pryme Energy Limited (
ASX:PYM) (POGLY:OTCMKTS) announce the December 2014 Quarterly Cashflow and Activities Report with significant highlights.
Financial
Average net daily sales to Pryme's account for the December quarter were 38 Bbls/day of oil. Pryme's remaining legacy project, Four Rivers, has remained relatively stable through 2014. Cash on hand at 31 December 2014 was $8.4 million which includes proceeds from the sale of the Raven Project during the quarter. Cash receipts from oil and gas sales for the quarter totalled $0.3 million. Revenue before royalty payments for the quarter totalled $0.3 million. Cash receipts may differ to reported revenue due to cash receipts from sales being disbursed net of royalties and the timing of working interest holder distributions by the operator.
Corporate
During the December Quarter Pryme successfully sold its interest in the Raven Project. The sale proceeds of A$6.8 million (US$5.5 million) represent more than 10 times the carrying value of Pryme's interest in the project. The sale proceeds increased Pryme's total cash balance at the 2014 year end to $8.4 million.
"Based on the last closing share price at the time of writing this report, the Company is presently valued at about 15% below its $8.4 million cash backing. The present share price does not reflect the good exploration results from the Capitola Oil Project during the quarter or the value of our existing Four Rivers project and its related oil production in Louisiana," said Justin Pettett, Pryme's Managing Director.
Projects
Capitola Oil Project
The initial Capitola Oil Project three well drilling program was completed during the December 2014 quarter. Pryme plans to drill at least two additional Capitola Oil Project wells during the March 2015 quarter.
Mahaffey Bishop PU1 (100% WI / 75% NRI before payout (75% WI and 56.25% NRI after payout))
During the Christmas holiday period the Capitola Oil Project was affected by unseasonal cold and wet weather (with daily temperatures as low as 13 degrees Fahrenheit (-11 degrees Celsius)) which impeded field operations.
As a result, the temporary generator powering the pumping unit on the Mahaffey well operated intermittently reducing the production of frack fluid from the well. At the time of this report the oil production rate was 68 barrels per day (52 net to Pryme.) We expect this rate to increase as frack fluid is produced and the well cleans up. The average rate of increase in oil production for the past week was over 12% per day.
Hope Boles PU1 (100% WI / 75% NRI before payout (75% WI and 56.25% NRI after payout))
The second well to be drilled in the Capitola Oil Project, the Hope Boles PU 1 in the Sweetwater acreage block, reached its total depth of 6,050 feet (1,844 metres). Mud log data collected while drilling, and electric logs run post drilling, indicate that our primary objective, multiple sand packages within the Canyon Sands formation, contains 94 gross and 36 net feet (11 net metres) of oil and gas saturated sandstone. The Hope Boles well also encountered a number of hydrocarbon shows in the Cline Shale as well as in other intervals within the wellbore.
The well was stimulated to plan, with completions in the Canyon Sand and Cline Shale, and responded as expected; oil, gas and frack fluids are currently being produced from both intervals. The Initial Potential (IP) of the well will be determined following the removal of frack fluid from the two intervals.
McCain 189-F1 (100% WI / 75% NRI before payout (75% WI and 56.25% NRI after payout))
The McCain 189-F1, which is located in the Claytonville acreage block, reached its total depth of 7,300 feet (2,225 metres). Mud log data collected while drilling and electric logs run post drilling identified several intervals of oil and gas saturated sandstone aggregating approximately 170 net feet (51 net metres) in the Canyon Sand series. Other intervals with hydrocarbon shows were encountered in the Cline Shale, Palo Pinto and Ellenburger formations which were also targets for this well.
Preparation for the fracture stimulation and completion in the Canyon Sand series and Cline Shale intervals of the McCain 189-F1 is underway; completion is scheduled for later this week. Completion was delayed to enable a test of the Ellenburger Formation, the deepest of the zones which had hydrocarbon shows. Testing the Ellenburger prior to completion in the main objective intervals was the most cost effective way to determine its productivity. The test in the Ellenburger did not show commercial quantities of hydrocarbons.
Earned Acreage in Capitola and Additional Drilling
Under the terms of the Capitola Oil Project Farmout Agreement (Agreement) Pryme has the option to earn up to a 75% WI in all mineral rights from surface to the top of the Cline Shale (the Shallow Rights) and up to a 50% WI in all other rights including the Cline Shale (the Deep Rights) in the entire 9,333 acres under lease. The interest is progressively earned by Pryme drilling wells and making cash option payments.
As Pryme has drilled the first three Capitola wells Pryme has earned a 30% WI (2,800 net acres) in the Shallow Rights and a 20% WI (1,867 net acres) in the Deep Rights. Further drilling in Capitola is scheduled to begin later this week with the drilling of the Shari Lynn #1 to 5,400 feet (1,646 metres) through the stacked Canyon Sand series. A fifth well is planned to be drilled later in early March.
Pryme has earned the right to drill up to five wells before exercising the next option and making any payments to the Capitola Oil Project vendors. The next option payment of US$750,000 is due on February 1, 2015. Due to the limited run time from the initial three well program, the pressure of drilling four new wells before August and taking into account the current market conditions including the price of oil, Pryme does not intend to exercise its option to earn additional interest in the leases. As a result Pryme will limit the interest it can earn in the project to a 45% WI (4,200 net acres) in the Shallow Rights and a 30% WI (2,800 net acres) in the Deep Rights on drilling of the fifth well.
"Our focus through 2015 will be on optimising our existing production, including our newly drilled Capitola wells and preserving our cash balance while oil prices are low," said Mr Pettett. "Under the Agreement Pryme is able to propose and drill wells at a minimum working interest of 45% at any time."
Guidance in response to crude oil prices
Mr Pettett commented on Pryme's response to the low oil price environment as follows, "we have taken steps to adjust our capital budget and development plans to preserve cash in response to the drop in oil prices. While these adjustments will slow the planned growth in reserves and production in the near term, the company retains a strong cash position of A$8.4 million (predominantly held in US dollars) and remains focused on adding reserves and production from the already drilled and planned Capitola Oil Project wells."
Production from the Capitola Oil Project is expected to be cashflow positive at current oil prices. The estimated cash operating costs are in the range US$10 - US$12 per net oil barrel (net of mineral owner royalty) and the estimated finding cost (total costs to drill, stimulate and complete a typical vertical Capitola Oil Project well) is approximately US$18 per net oil barrel (based on the assumption of an estimated ultimate recovery of 73,000 barrels of oil per well).
Under the terms of the Agreement the continued drilling of wells is optional for Pryme and decisions to drill wells will be taken after consideration of many factors including oil prices and the economic environment.
Four Rivers Project (8% - 25% WI)
The December 2014 quarter oil sales of 2,047 barrels (22 Bbls/day net to Pryme) were marginally lower than the previous quarter. This is mainly attributable to natural decline in production. Pryme has an interest in 1,260 acres (240 acres net to Pryme) located in LaSalle and Catahoula Parishes Louisiana and Jefferson and Wilkinson Counties in Mississippi.
To view the full quarterly including tables and figures, please visit:
http://media.abnnewswire.net/media/en/docs/ASX-PYM-839999.pdf
About Indago Energy Ltd
Indago Energy Ltd (ASX:INK) (OTCMKTS:POGLY) is an Australian listed company engaged in oil and gas exploration, development and production. Indago's project portfolio includes liquid rich producing assets together with substantial oil development and exploration acreage in the United States.
The Company's Exploration and Production focus is on high growth oil and gas projects offering scalability of production, cash flows and reserves. Indago currently has several producing projects together with a significant acreage position. The Company's immediate focus is the development of its Capitola Oil Project located in an active region of the Cline Shale resource play along the Eastern Shelf of the Permian Basin, Texas. The project's core development and exploitation opportunities are shallower multiple "stacked" sandstones and limestones to depths of 7,000 feet which are effectively produced from vertically drilled wells. Indago's value driven model is executed through exploiting shallower, well defined intervals with advanced completion and stimulation technology within known produced oil fields together with exposure to the emerging Cline Shale resource play.
Indago's shares are publicly traded on the Australian Securities Exchange (ASX ticker: INK) and also as American Depositary Receipts on the OTCQX (ADR ticker: POGLY).
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