Horizon Petroleum Ltd. press release
Horizon Petroleum Announces Updated NI51-101 Compliant Reserves and Resources Report for the Lachowice Gas Field, Poland
TSXV - TSX Venture Exchange · Natural Gas · Oil · Canada
Canada NewsWire
CALGARY, AB , June 18, 2024 /CNW/ - Horizon Petroleum Ltd. (the "Company" or "Horizon") (TSXV: HPL.H) is pleased to release an updated independent reserve and resources evaluation ("Reserves and Resource Report") for the Lachowice conventional natural gas field in the Bielsko-Biala concession in southern Poland. The Bielsko-Biala concession is one of two concessions that are anticipated to be awarded to the Company by the Polish Government subject to completion of the Polish Government's conversion of the concessions to its new concession law (the "Transformation Process").
The Reserves and Resources Report was prepared by APEX Global Engineering Inc. ("APEX"), the Company's independent qualified reserves evaluator, with an effective date of December 31, 2023 and was prepared in compliance with the standards set out in National Instrument 51-101 _Standards of Disclosure for Oil and Gas Activities _of the Canadian Securities Administrators and the Canadian Oil and Gas Evaluation Handbook (COGEH). The reserves and resources will be assigned to the Company upon completion of the Transformation Process and signing of the new concession agreements in Poland .
Highlights
Gross Probable Reserves (2P) of 34.4 Bcf gas and 262MBbls of natural gas iquids (total of 6.0 MMBoe) with a NPV 10, BTAX value of US$75.7million (the natural gas liquids are expected to consist primarily of condensate) Gross Risked Best Estimate Contingent Resources (2C) of 164 Bcf of gas and 1.2MMBbls of natural gas liquids (total of 28.5 MMBoe) with a NPV 10, BTAX value of US$384 million . (the natural gas liquids are expected to consist primarily of condensate) Risked Best Estimate Prospective Resources of 119 Bcf of gas and 875 MBbls of natural gas liquids (total of 20.7 MMBoe) The planned phased development plan, consisting of one existing well re-entry tied into a skid mounted gas-to-power (G2P) facility or to a compressed natural gas (CNG) facility in 2025 expected to result in sales of approximately 1.5mmscf/d. One new well is planned to be drilled, completed and tested in 2025 and a new gas processing facility is expected to be built with a capacity of 30MMcfe/d and a projected on-stream date of Q1 2027. Multiple horizontal or highly deviated wells are anticipated to be drilled as part of the development plan in order to fill the plant to capacity by 2028.
Discussion of Reserves and Resources
Horizon owns 100% interest in two subsidiary companies in Poland that are in the final stage of the process of acquiring the sole rights to two conventional oil & natural gas concessions in Poland known as Bielsko-Biala and Cieszyn. The two companies, (Energia Karpaty Zachodnie Sp.z.o.o. Sp.k. ("EKZ") and Energia Karpaty Zachodnie spółka z ograniczoną odpowiedzialnością) were acquired from San Leon Energy. Upon successful completion of the Transformation Process, Horizon is required to pay to San Leon Energy the transaction consideration in cash, Horizon shares and a Net Profits Interest. The full details of the acquisition are described in our Annual Financial Statements and Management Discussion and Analysis. The Company through its subsidiary, EKZ, has engaged with the Polish Ministry of the Environment to complete the Transformation Process for the two concessions as described in the Annual Financial Statements and Management Discussion and Analysis. The Transformation Process is also described in the Company's press releases dated August 23, 2023 , March 18, 2024 and May 14, 2024 . In summary, the transformation of the concessions to the new Polish concession laws is necessary as a result of the implementation of amendments to Poland's geological and mining laws. The Transformation Process had been initiated by San Leon Energy but was stalled during the COVID pandemic.
APEX assigned Probable Reserves and Contingent and Prospective Resources to the Lachowice field, which at 10,561 acres represents approximately 4% of the total lands to be held by Horizon under the concessions (see Table 1 below). The reserves and resources assigned are subject to significant risks. Please refer to the "Risks" section at the end of this press release.
Table 1: Concession Acreage
| Concessions | Acreage | | | km 2 | Acres | | | Bielsko-Biala | 805 | 198,821 | | - Lachowice field | 43 | 10,561 | | Cieszyn | 326 | 80,507 | | Total Surface Area | 1,131 | 279,328 |
Tables 2, 3 and 4 below summarize APEX's estimates of the conventional natural gas reserves and resources contained in the Lachowice gas field, and would be assigned to Horizon subject to completion of the Transformation Process. The volumes shown are attributable to 100% working interest, before deduction of any associated royalty burdens. The economic values presented are shown after deduction of the associated royalty burdens, the NPI payments to San Leon, operating and capital expenses, but before any attributable income taxes. Table 5 summarizes the commodity pricing used in the economic evaluations.
Table 2: Probable Reserves in the Lachowice Field
| Probable Reserves | PIIP | Gross Recoverable Sales | Net Recoverable Sales | Before Income Taxes (US$MM), Discounted at | | | | | | | | | | 0 % | 5 % | 10 % | 15 % | 20 % | | Conventional Natural Gas (Bcf) | 49 | 34.4 | 31.6 | | | | | | | Natural Gas Liquids (MBbl) | 344 | 261.7 | 240.4 | | | | | | | Total Bcfe | 51.2 | 36.0 | 33.0 | $245 | $131 | $76 | $46 | $29 | | Total MMBoe | 8.5 | 6.0 | 5.5 | | | | | |
| 1 : | There is no certainty that it will be commercially viable to produce any portion of the reserves. | | 2. | See "Advisories". |
Table 3: Contingent Resources – Development Unclarified in the Lachowice Field
| | | | | | | | | | | | | | | | Contingent Resources - Development Unclarified | Discovered PIIP | | Unrisked Contingent Resources - Dev. Unclarified | Chance of Dev. | Risked Contingent Resource (2C) - Dev. Unclarified | Before Income Taxes (US$MM), Discounted at | | | | | | | | | | | | | | | | | | | | | | | | | 1C | 2C | 3C | 1C | 2C | 3C | ( %) | | 0 % | 5 % | 10 % | 15 % | 20 % | | Conventional Natural Gas (Bcf) | 309 | 422 | 583 | 169 | 238 | 339 | 68.6 % | 163.7 | | | | | | | Natural Gas Liquids (MBbl) | 2,276 | 3,110 | 4,298 | 1,248 | 1,756 | 2,499 | 68.6 % | 1,206.2 | | | | | | | Total Bcfe | 323 | 441 | 609 | 177 | 249 | 354 | 68.6 % | 170.9 | $1,268 | $661 | $384 | $241 | $159 | | Total MMBoe | 53.8 | 73.5 | 101.5 | 29.5 | 41.5 | 59.0 | 68.6 % | 28.5 | | | | | |
| 1. | 1 There is no certainty that it will be commercially viable to produce any portion of the resources. | | 2. | See "Advisories". |
Table 4: Prospective Resources in the Lachowice Field
| Prospective Resources | Undiscovered PIIP | Unrisked Prospective Resources | Chance of Dev | Average Chance of Disc | Risked Prospective Resources - Best Estimate | | | | | | Low Estimate | Best Estimate | High Estimate | Low Estimate | Best Estimate | High Estimate | ( %) | ( %) | | | | Conventional Natural Gas (Bcf) | 537 | 764 | 1108 | 331 | 467 | 671 | 68.6 % | 37.1 % | 118.7 | | Natural Gas Liquids (MBbl) | 3,956 | 5,351 | 7,757 | 2,515 | 3,553 | 5,105 | 68.6 % | 35.9 % | 875 | | Total Bcfe | 561 | 797 | 1155 | 346 | 488 | 702 | 68.6 % | 37.0 % | 124 | | Total MMBoe | 93.4 | 132.8 | 192.4 | 57.6 | 81.4 | 116.9 | 68.6 % | 37.0 % | 20.7 |
| 1. | There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. | | 2. | See "Advisories". |
Table 5: Commodity Pricing
[](https://mma.prnewswire.com/media/2441370/Horizon_Petroleum_LtdHorizon_Petroleum_Announces_Updated_NI51_.html)
| 1. There is currently extreme volatility in the European gas markets with prices fluctuating widely month to month and even day to day. See "Advisories". | | 2. The prices forecast in Table 5 is reflective of the actual gas price in Poland on the effective day of the Reserves and Resource Report (December 31, 2023). |
History and Development Plan
The Lachowice field is at an early stage of conventional natural gas development. Lachowice-1, Lachowice-7 and Stryszawa-2K are the primary wells of interest in the field. Despite being essentially vertical in their design, and using sub-optimal drilling and completion methods for naturally fractured formations, the wells tested at rates reported by former operators to be up to 5.8 MMcf/d, 8.9 MMcf/d, and 2.5 MMcf/d, respectively during the original open hole and cased hole tests _. _The Company is relying on production test reports from the former operators, the details of which are incomplete . Each of these wells was drilled and tested from reservoir depths of between 2,700-4,000 meters targeting naturally fractured carbonate reservoirs of Middle Devonian age. The natural gas tested was reported to be sweet (containing no H2S), with up to 91% methane and 7 bbls/MMcf of condensate.
Horizon is currently in the process of finalizing its development plan that will be implemented upon completion of the Transformation Process and signing of the new concession agreements. In general, it is currently anticipated that the development plan will begin with the re-entry of the Lachowice 7 wellbore that has the most complete old test information. Horizon is targeting to re-enter Lachowice 7 in the first half of 2025. First gas production is planned to occur into either a skid mounted G2P facility or a temporary CNG unit with start-up in 2025. Initially, natural gas sales are anticipated to be facilities constrained at approximately 1.5 MMcfe/d. The well will produce natural gas under primary drive via the natural fractures and the matrix porosity within the reservoir. The G2P or CNG project is considered pre-development and is expected to cost approximately US$4.25 million to first production.
One new well is subsequently planned to be drilled, completed and tested and a new gas processing facility built with capacity of 30MMcfe/d with a projected on stream date of late 2026 or early 2027. Additional horizontal or highly deviated wells are expected to be drilled as part of the development plan in order to fill the plant to capacity with peak production by 2028.
Operating netback for the G2P project is forecast to be approximately US$5.86 /Mcfe for the first 12 months of production based on the current price forecast at the time of the Reserves and Resources Report. Over the life of the project, for the probable reserves case and forecast price, the operating netback is expected to be US$7.81 /Mcfe. The exact timing of the development is subject to regulatory permiting and approval processes in Poland .
About Horizon Petroleum Ltd.
Calgary -based Horizon is focused on the appraisal and development of conventional oil & natural gas resources onshore in Europe . The Management and Board of Horizon consist of oil & natural gas professionals with significant international experience.
Advisories
Oil and Gas Advisories
The reserve and resource estimates contained in this press release have been prepared in accordance with NI 51-101, is dated as of December 31, 2023 and prepared by APEX Global Engineering Inc..
The reserve and resource estimates of natural gas and natural gas liquids provided in this news release are estimates only, and there is no guarantee that the estimated reserves and/or resources will be recovered. Actual reserves and resources may eventually prove to be greater than, or less than, the estimates provided herein. It should not be assumed that the estimates of future net revenues presented herein represent the fair market value of the reserves and/or resources. There are numerous uncertainties inherent in estimating quantities of natural gas and natural gas liquids reserves and/or resources and the future cash flows attributed to such reserves and/or resources.
_For example, the commodity pricing used in the Reserves and Resource Report was affected by the added political risk regarding the ongoing conflict between Poland's neighboring country, Ukraine , and Russia . On February 24, 2022 , Russia invaded Ukraine . The invasion turned into an ongoing war. The Reserve and Resource Report attempts to gauge the impact the war may have on produced hydrocarbon pricing, as well as the potential for commercial development of the Company's project. The commodity pricing used in the Reserves and Resource Report modified the pricing from the Company's previous reserves report to reflect current pricing. There has been a significant drop in gas prices in Poland since such previous report. Given the uncertainty of the outcome of the ongoing conflict, accurately assigning risk to the con __¿¿ __lict is not possible at this time. The inherent unpredictability of war has spilled over into the cost of energy, whether conventional hydrocarbons, electrical power as well as the cost of materials and service. Although gas prices reached a peak in 2022, shortly after the invasion of the Russian forces, prices have subsequently dropped substantially inline with gas prices in effect prior to the invasion. The Reserve and Resource Report uses gas prices which reflect prices prior to the impact of Covid-19 and before the commencement of the Russian con ¿¿ lict. The company is unable to predict whether the war in Ukraine may escalate further, which may cause the Company to invoke "Force Majeure" and thereby could impact on the timing for development of the Company's projects _
Additional risks and uncertainties include but are not limited to: (i) the fact that there is no certainty that the zones of interest will exist to the extent estimated or that the zones will be found to have natural gas with characteristics that meet or exceed the minimum criteria in terms of net pay thickness and/or porosity, or that the natural gas will be commercially recoverable to the extent estimated; (ii) the fact that there is no certainty that any portion of the probable reserves and contingent and prospective resources will be commercially viable to produce; (iii) the fact that the Company must hire an operations team and executive team in both Calgary and Poland in order to execute on the development plan, and there are no guarantees that suitably qualified technical and professional staff and/or consultants will be available; (iv) the lack of additional financing to fund the Company's development activities and continued operations; (v) the risks associated with obtaining approvals to access land to drill wells or install infrastructure and facilities in a reasonable time frame; the Polish regulatory regime is relatively stable but is marked with long approval processes relative to North American jurisdictions; (vi) the risks in acquiring or constructing adequate natural gas infrastructure to produce and sell natural gas, and whether capacity will be available in the existing main pipeline system at reasonable costs; (vii) the risk that there may not be a drilling rig available to drill the required wells, and the risk that if a rig mobilization is required from outside of Poland , that the costs may be prohibitive; (ix) risks inherent in the international oil and natural gas industry; fluctuations in foreign exchange and interest rates; (xi)the number of competitors in the oil and gas industry with greater technical, financial and operations resources and staff; (xii) fluctuations in world prices and markets for oil and natural gas due to domestic, international, political, social, economic and environmental factors beyond the Company's control; (xiii) changes in government regulations affecting oil and natural gas operations; (xiv) potential liabilities for pollution or hazards against which the Company cannot adequately insure or which the Company may elect not to insure; (xv) contingencies affecting the classification as reserves versus resources which relate to the following issues as detailed in the COGE Handbook: ownership considerations, drilling requirements, testing requirements, regulatory considerations, infrastructure and market considerations, timing of production and development, and economic requirements; (xvi) the fact that there is no certainty that any portion of the prospective resources will be discovered and if discovered, there is no certainty that it will be commercially viable to produce any portion of the resources; and (xvii) other factors beyond the Company's control. _
Any reference in this press release to PIIP, contingent resources and prospective resources are not, and should not be confused with oil and natural gas reserves.
Definitions
Total Petroleum Initially in Place (" PIIP ") refers to the total quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes the petroleum that exists in known accumulations prior to production and the estimated quantities yet to be discovered in the various leads and prospects identified by seismic and inferred by geology. A portion of the PIIP will be recoverable as determined by ultimate recovery factors and the estimated recoverable portion is further classified as Reserves, Contingent Resources or Prospective Resources.
Discovered Petroleum Initially in Place (" Discovered PIIP " or " DPIIP ") is the total quantity of Petroleum that is estimated as of the effective date of the Reserves and Resources Report to be contained in known accumulations prior to production.
Multiple development projects may be applied to each known accumulation which may be separated vertically into different formations or by area in different pools; each project will recover a portion of the PIIP according to its unique reservoir characteristics. The projects will be subdivided into Commercial and Sub-Commercial at the effective date with the estimated recoverable petroleum quantities being classified as Reserves and Contingent Resources .
_Reserves __are estimated remaining quantities of oil and natural gas and related substances anticipated to be commercially recoverable from known accumulations, from a given date forward, based on: _
| (a) | analysis of drilling, geological, geophysical and engineering data; | | (b) | the use of established technology; and | | (c) | specified economic conditions (see the discussion of " Economic Assumptions " below). |
Reserves are classified according to the degree of certainty associated with the estimates.
| (d) | Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. | | (e) | Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. | | (f) | Possible Reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved + probable + possible reserves |
_Company Gross Reserves __are the Company's working interest (operating or non-operating) share before deducting royalties and without including any royalty interests of the Company. _
_Resources __are defined in the Canadian Oil and Gas Evaluation Handbook (COGEH) Volume 1, section 5 as follows: _
_Contingent Resources __are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied projects are not yet considered mature enough for commercial development due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality. _
Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources, the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent Resources are further classified in accordance with the level of certainty associated with the estimates and may be sub classified based on project maturity and/or characterized by their economic status.