Highlights:
· Formal Agreements signed with Millennium PetroCapital, to selectively participate in Austin Chalk production wells, across 250,000 acres in Gonzales County, Texas
· Millennium has a large inventory of low-risk Austin Chalk development wells
· Expected initial production rates ranging from 100 to 400 barrels of oil per day and total recoveries 100,000 to 300,000 barrels of oil per well
· First joint development well expected to be spudded in April and in production in May
Pennpetro Energy PLC an independent oil and gas company focusing on production and development in Gonzales County, Texas, USA, announces that, through its wholly owned subsidiary, Nobel Petroleum USA Inc. ("Nobel") has reached an important milestone towards becoming an oil producer with the execution of the Participation, Development and Option Agreement and Joint Operating Agreement with Millennium PetroCapital Corporation ("Millennium") for a proposed 250,000 acre (1,011 square kilometres) Area of Mutual Interest ("AMI") petroleum joint venture in Gonzales County, Texas.
This announcement follows the earlier RNS, dated 10 October 2022, announcing the signing of the initial heads of terms agreement with Millennium.
Tom Evans, Pennpetro's CEO, commented:
"The execution of this agreement with Millennium is a major step forward towards Pennpetro becoming an oil producer. Our management team at our US subsidiary, Nobel, are now working with Millennium on budgets and scheduling to allow Pennpetro to participate in the upcoming Whistling Straits #1H well in the Gonzales County AMI, which is expected to spud in April. We look forward to updating shareholders at a very exciting time for the Company."
The Gonzales County 250,000 acre (1,011 square kilometres) AMI is located about 290 miles (466 kilometres) due west of Houston and will provide PPP's Nobel with a large inventory of low risk development options in a world class oilfield. The joint venture will not impact Nobel's separate City of Gonzales development, which will continue to be owned 100% and operated by Nobel.
Under the new agreements, Nobel will have the option, but not the obligation, to participate in any and all development wells within the AMI by Millennium to a depth sufficient to test the target Austin Chalk interval.
The Austin Chalk has been producing oil and gas in Texas since at least the 1920s and has cumulative production of almost 1 billion barrels of oil and over 5 trillion cubic feet of gas to date. Furthermore, the United States Geological Survey recently assessed the mean recoverable undiscovered resource potential for the Austin Chalk to be 6.9 billion barrels of oil and 41.5 trillion cubic feet of gas. The chalk directly overlies the prolific Eagle Ford Formation, which is the primary source rock of most of the oil in the chalk. Oil migrates into the chalk through microfractures and fills the tectonic fractures and porosity matrix.
Wells in the project area are typically completed open hole (without fracking) with 4,000 feet (1,219 metres) laterals, connecting naturally occurring fractures within the chalk. Reservoir depths range from 7,000-8,000 feet (2,133-2,438 metres) subsea. Nobel expects each well to recover between 100,000-300,000 barrels of oil with Initial Production ("IP") rates ranging from 100-400 barrels of oil per day ("bopd"), based on unfracked analog wells within the Austin Chalk Play. Oil quality is general sweet with API gravity of about 35 degrees and oil is trucked from the well site to nearby sale points.
The new agreements provide for Nobel paying 33.33% of the cost to drill and complete each new joint development well connected to the storage tanks for a net 25% working interest (18.75% net revenue interest) as well as a prospect fee which covers sunk costs relating to leasing, land, legal, 3D seismic licensing, geological and geophysical analysis.
Millennium is working towards spudding the first joint development well in April 2023 and this will be a sidetrack from an earlier producer from a deeper interval.
