Horizon Petroleum Ltd. press release
Horizon Petroleum Announces Updated NI51-101 Reserves and Resources Report for Poland
TSXV - TSX Venture Exchange · Natural Gas · Oil · Canada
Canada NewsWire
CALGARY, AB , Dec. 5, 2022 /CNW/ - Horizon Petroleum Ltd. (the "Company" or "Horizon") (TSXV: HPL.H) is pleased to report the results of a recent independent reserve and resource evaluation ("Reserves Report") on the Lachowice conventional natural gas field in the Bielsko-Biala concession in southern Poland. The Reserves Report has an effective date as of October 01, 2022 and was prepared in compliance with the standards set out in National Instrument 51-101 of the Canadian Securities Administrators and the Canadian Oil and Gas Evaluation Handbook (COGEH).
Highlights
Gross Probable Undeveloped Reserves (2P) of 34.4 Bcf gas and 262MBbls of condensate (total of 6.0 MMBoe) valued at US$458million (NPV10 BTAX) Gross Risked Best Estimate Contingent Resources (2C) of 152 Bcf of gas and 1.15MMBbls of condensate (total of 26.3 MMBoe) valued at US$1,846 million (NPV10 BTAX), Risked Best Estimate Prospective Resources of 118 Bcf of gas and 869 MBbls (total of 20.5 MMBoe) Phased development plan, consisting of one existing well re-entry tied into a CNG (compressed natural gas facility) in 2024 resulting in sales of 1.5mmscf/d by Q2 2024. Two new wells will be drilled in 2025 and a new gas processing facility built with capacity of 30MMcfe/d and a projected on-stream date of Q1 2026. Multiple horizontal or highly deviated wells will be drilled commencing in 2026 to fill the plant to capacity by 2027.
Discussion of Reserves and Resources
Horizon holds the rights to a 100% interest in two conventional oil & natural gas concessions in Poland known as Bielsko-Biala and Cieszyn through two wholly owned Polish subsidiary companies which the Company acquired from San Leon Energy. The full details of the acquisition are described in our Annual Financial Statements and Management Discussion and Analysis. The Company has also re-engaged with the Polish Ministry of the Environment to complete the Transformation Process as described in the Annual Financial Statements and Management Discussion and Analysis. In summary a transformation of the concessions to the new Polish concession laws ("Transformation Process") is required by the Polish government as a result of the implementation of amendments to Poland's geological and mining laws. An application for the Transformation Process was submitted to the Polish government in December of 2016 for the Primary Concessions, however, it is not yet complete. The licenses for the Primary Concessions expired in April and August of 2018, however, as the Transformation Process for the Primary Concessions had already commenced they are effectively in suspension pending a decision by the Polish government on the Transformation Process. The timing of completing the Transformation Process has been severely impacted by travel and work restrictions imposed to combat the Covid-19 pandemic, as well as by the Company's lack of financial resources. Completing the Transformation Process will involve negotiations with the Polish Government to finalise: (i) the work programs to be conducted, and (ii) the value of the concession fees and guarantees that will be paid to the Polish government.
APEX Global Engineering Inc. ("APEX") prepared the Reserves Report with an effective date of October 01 , 2022. APEX assigned the 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 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 Horizon's conventional natural gas reserves and resources, subject to completion of the Transformation Process. The volumes shown are attributable to Horizon's 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, 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 Lachowice Field
| Probable Reserves | PIIP 3 | Recoverable Sales | Before Income Taxes (US$MM), Discounted at | | | | | | 0 % | 5 % | 10 % | 15 % | 20 % | | | | | Conventional Natural Gas (Bcf) | 49 | 34.4 | | | | | | | Condensate (MBbl) | 344 | 261.7 | | | | | | | Total Bcfe | 51.2 | 36.0 | $1,251 | $719 | $458 | $316 | $230 | | Total MMBoe | 8.5 | 6.0 | | | | | |
| Note 1: There is no certainty that it will be commercially viable to produce any portion of the reserves. |
Table 3: Contingent Resources – Development Unclarified in Lachowice Field
| Contingent Resources - Development Unclarified | Discovered PIIP 3 | Unrisked Contingent Resources - Dev. Unclarified | Chance of Dev. | Risked Contingent Resource (2C) - Dev. Unclarified | Before Income Taxes (US$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 % | 151.8 | | | | | | | Condensate (MBbl) | 2,276 | 3,110 | 4,298 | 1,248 | 1,756 | 2,499 | 68.6 % | 1,154.8 | | | | | | | Total Bcfe | 323 | 441 | 609 | 177 | 249 | 354 | 68.6 % | 158.7 | $5,435 | $3,015 | $1,846 | $1,216 | $845 | | Total MMBoe | 53.8 | 73.5 | 101.5 | 29.5 | 41.5 | 59.0 | 68.6 % | 26.5 | | | | | |
| Note 2: There is no certainty that it will be commercially viable to produce any portion of the resources. |
Table 4: Prospective Resources in Lachowice Field
| Prospective Resources | Undiscovered PIIP 3 | Unrisked Prospective Resources | Chance of Dev. | Average Chance of Disc. | Risked Prospective Resources - Best Estimate | | | | | | Low Estimate | Best Estimate | High Estimate | Low Estimate | Best Estimate | High Estimate | ( %) | ( %) | | | | Conventional Natural Gas (Bcf) | 544 | 778 | 1133 | 329 | 466 | 673 | 68.6 % | 36.9 % | 118.0 | | Condensate (MBbl) | 4,007 | 5,448 | 7,933 | 2,501 | 3,547 | 5,121 | 68.6 % | 33.9 % | 826 | | Total Bcfe | 568 | 811 | 1181 | 344 | 487 | 704 | 68.6 % | 36.8 % | 123 | | Total MMBoe | 94.6 | 135.2 | 196.8 | 57.3 | 81.2 | 117.3 | 68.6 % | 36.8 % | 20.5 |
| Note 3: There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. |
Table 5: Commodity Pricing
| Year | Commodity Price Forecast | | | | Natural Gas | Condensate | | | | (US$/MMBTU) | (US$/mcf) | (US$/bbl) | | | 2022 | 52.38 | 51.38 | 87.00 | | 2023 | 63.29 | 62.29 | 92.00 | | 2024 | 68.75 | 67.75 | 96.00 | | 2025 | 55.65 | 54.65 | 98.00 | | 2026 | 51.29 | 50.29 | 96.00 | | 2027 | 45.83 | 44.83 | 92.00 | | 2028 | 41.47 | 40.47 | 92.00 | | 2029 | 39.29 | 38.29 | 90.00 | | 2030 | 39.29 | 38.29 | 90.00 | | 2031 | 40.07 | 39.07 | 91.80 | | 2032 | +2% thereafter | | |
| There is currently extreme volatility in the European gas markets with prices fluctuating widely month to month and even day to day. | | The prices forecast in Table 5 is reflective of the actual gas price in Poland on the effective day of the reserves report (Oct 01, 2022) |
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 on the field and, despite being essentially vertical in their design and utilizing sub-optimal drilling and completion methods for naturally fractured formations, tested at rates of up to 5.8 MMcf/d, 8.9 MMcf/d, and 2.5 MMcf/d, respectively. Each of these wells was drilled and tested, with reservoir depths of 3,000-4,000 meters targeting a naturally fractured carbonate reservoir of Middle Devonian age. The natural gas is sweet, with up to 91% methane and 7 bbls/MMcf of condensate.
Following receipt of the Reserves Report, Horizon is currently in the process of finalizing its development plan. In general, it is currently anticipated that the development plan would begin with the re-entry of an existing wellbore. Provided Horizon successfully closes the Acquisition and is successful with the Transformation Process, it is targeting to re-enter and test a well in the first half of 2024, with first production to occur into a temporary compressed natural gas unit Q2, 2024, with natural gas sales initially facilities constrained at approximately 1.5 MMcfe/d. If well capability is higher, incremental production and sales can be realized with the addition of more temporary facilities and trucking. The wells will produce natural gas under primary drive via the natural fractures and the matrix porosity within the reservoir. The project is considered pre-development and is expected to cost approximately US$7.5 million to first production.
Two new wells will be drilled in 2025 and a new gas processing facility built with capacity of 30MMcfe/d and a projected on stream date of Q1 2026. Multiple horizontal or highly deviated wells will be drilled commencing in 2026 to fill the plant to capacity by 2027.
Operating netbacks are expected to be approximately US$55.60 per Mcfe, based on current price forecast at the time of the reserves report. Timing of the development is subject to regulatory approvals, and Horizon has initiated efforts to begin and fast-track the regulatory process.
About Horizon Petroleum Ltd.
Calgary -based Horizon is focused on the appraisal and development of conventional oil & natural gas resources onshore 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 October 01, 2022 and prepared by APEX Global Engineering Inc.. _
The reserve and resource estimates of natural gas and natural gas liquids reserves 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.
These 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 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.
Not all technically feasible development plans will be commercial. The commercial viability of a development project is dependent on the forecast of fiscal conditions over the life of the project. For Contingent Resources, the risk component relating to the likelihood that an accumulation will be commercially developed is referred to as the "chance of development." For contingent resources, the chance of commerciality is equal to the chance of development.
_Development Pending __are contingencies that are being actively pursued; expect resolution in a reasonable time period; are directly influenced by the developer with both, internal approvals and commitment and development timing and; have a high chance of development (>80%). _
_Development on Hold __are contingencies with major non-technical contingencies identified; have a reasonable chance of development (>50%); have contingencies that are beyond the control of the developer including but not limited to: external approvals, economic factors, market access, political factors and social license. _
_Development Unclarified __are contingencies that have not been clearly defined; the project is currently under active evaluation; significant further appraisal may be required; progress is expected in a reasonable time period; chance of development is difficult to assess and could be a big range (20%-80%). _
_Development Not Viable __are contingencies that have been identified; the project was evaluated and considered not viable or significant further appraisal may be required; progress is not expected in a reasonable time period and; has a low chance of development (<<50%). _
Contingent Resources –Development Pending and –Development On Hold are considered economic, Contingent Resources –Development Unclarified have economics that are undetermined, and Contingent Resources –Development Not Viable are considered sub-economic.
_Prospective Resources __are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub classified based on project maturity. _