Rose Petroleum plc, the Rocky Mountain-focused oil and gas company, is pleased to provide an update on the restructuring of its project in the Paradox Basin, Utah, U.S. further to its announcement on 14 October 2019.
- Rose has been granted regulatory approval by the U.S. Bureau of Land Management (the "BLM") for two year lease extensions on circa 11,300 acres within the core of its project area.
- The Company now holds a focused and contiguous land position of circa 19,900 acres with extended lease terms (as set out in note 1 below)1, the majority of which is covered by Rose's proprietary 3D seismic survey which was completed in 2018.
- Rose gains an immediate 75% working interest in and operatorship of the extended acreage, rather than the earn-in structure through which the leases were formerly held.
- There are no acquisition costs related to the extended acreage, and Rose will continue to make lease payments on the extended acreage. Overall lease payments have been substantially reduced via the restructuring now that non-core acreage has been relinquished.
- The restructured project has estimated net 2C Contingent Recoverable Resources of circa 9 million barrels of oil equivalent ("mmboe") solely within the Cane Creek reservoir(2) with further exploration potential to be found in 5 shallower reservoir intervals.
Colin Harrington, Chief Executive Officer, stated:
"With the project JV agreement successfully renegotiated, the project land position now restructured and an increase in term now secured, we are in a strong position to recommence our farm-in process.
"The restructured project, combined with the increased focus that partners like the U.S. Department of Energy are bringing to the Paradox Basin, will make the project more attractive to potential funding partners.
"While the Company's immediate focus is to acquire near-term production in more mature Rocky Mountain Basins, the upside that can be delivered from our Paradox project makes it a highly attractive investment opportunity and ensures the project will remain a central part of Company's future focus and activity.
"I would like to thank our JV partner Rockies Standard Oil Company and the BLM for their continued commitment to Rose and the development of the project."
Since its update to the market on 14 October 2019, Rose has worked with Rockies Standard Oil Company ("RSOC") and the appropriate regulatory bodies to complete the restructuring of the project.
In the October 2019 announcement, Rose outlined that it would focus its efforts on the most valuable project acreage. As part of this process, Rose and RSOC agreed to voluntarily terminate the original Federal Unit Agreement (the Gunnison Valley Unit ("GVU")). Subsequently, with the GVU Agreement terminated and pursuant to U.S. Federal Oil and Gas Regulation 43 CFR 3107.4, Rose can announce that a subset of leases, located within the project core have been extended for a further two years and added back into the Company's portfolio of leases.
The extension of these leases enables Rose to refocus on a core acreage position of circa 19,900 acres which contains an estimated net 2C Contingent Recoverable Resources of circa 9 million barrels of oil equivalent ("mmboe") associated with 22 drilling targets in the Cane Creek reservoir. The development of solely this reservoir could generate an estimated post-tax net present value to Rose of US$64m (at a 10% discount rate) ("NVP10")(3), a significant premium to the Company's current market capitalisation and which demonstrates the considerable potential of the project. The Company also recognizes further exploration potential in 5 shallower reservoir targets which could add further value to the project over time.
With the project restructuring completed and the land position now clarified, the Company will recommence the farm-out process.
Additionally, while the lease extensions are for an initial period of two years, they can be extended further through the creation of a new federal unit, the drilling of a new well on the new unit and establishing production of paying quantities of oil and gas.