TomCo Energy plc (TOM) is pleased to announce the receipt of an independent report commissioned from Netherland, Sewell & Associates, Inc. ("NSAI") estimating the oil reserves, associated marketable sand volumes, and future net revenue, as of 31 December 2021, in respect of a potential commercial scale project on the mining properties comprising the Tar Sands Holdings II LLC ("TSHII") site located in the Uinta Basin, Utah, United States (the "Report") . As previously announced, TomCo's wholly owned subsidiary, Greenfield Energy LLC, ("Greenfield"), owns a 10% Membership Interest in TSHII with an exclusive option, at its sole discretion, to acquire the remaining 90% of the Membership Interests for additional cash consideration up to 31 December 2022.
- NSAI have estimated the proved ("1P"), proved plus probable ("2P"), and proved plus probable plus possible ("3P") oil reserves, associated marketable sand volumes, and future net revenue, as at 31 December 2021 in respect of a 100 per cent. interest in a potential commercial scale project on the mining properties comprising the TSHII site
- NSAI estimate 1P oil reserves of 22.8 million barrels of oil ("bbls"), 2P oil reserves of 33.6 million bbls and 3P oil reserves of 44.3 million bbls
- NSAI further estimate associated volumes of marketable sand at 22.8 million tonnes (1P), 41.2 million tonnes (2P) and 59.8 million tonnes (3P)
- Total estimated undiscounted future net revenues (as described further below) range from US$942 million based on 1P reserves to approximately US$2.5 billion based on 3P reserves in respect of a gross 100% interest in TSHII
- Estimated discounted future net revenues (as described further below) attributable to TomCo's current 10 per cent. interest in TSII range from approximately US$30.5 million based on 1P reserves to approximately US$57.6 million based on 3P reserves
Commenting, John Potter, CEO of TomCo, said : "We are delighted with the findings of NSAI's Report. The Report serves to confirm our view that the TSHII site contains substantial economic resources, both in terms of oil and marketable sand, that we are focussed on seeking to exploit.
" Greenfield continues to progress its previously announced plans to pursue both the drilling of certain near-term oil production wells and, thereafter, the potential acquisition of the balancing 90% of the Membership Interests in TSHII and construction of its first commercial scale plant on the site, all of which remain subject to securing the requisite funding. We look forward to providing further updates in due course."
NSAI have estimated the proved (1P), proved plus probable (2P), and proved plus probable plus possible (3P) oil reserves, associated marketable sand volumes, and future net revenue, as of 31 December 2021 in respect of a 100 per cent. Interest in a potential commercial scale project situated on the mining properties comprising the TSHII site in the Uinta Basin, Utah, United States.
The Report was prepared using certain price and cost parameters specified by TomCo. The reserves estimates in the Report were prepared in accordance with the definitions and guidelines set out in the 2018 Petroleum Resources Management System ("PRMS") approved by the Society of Petroleum Engineers ("SPE"). Although marketable sand volumes are not hydrocarbons, NSAI used the 2018 PRMS as the framework for the categorisation of such volumes and their associated revenues.
In the first half of 2021, Greenfield operated Petroteq Energy Inc's existing oil sands pilot plant at Asphalt Ridge, Utah (the "POSP") in order to demonstrate the feasibility of mining shallow tar sands using conventional open pits and applying solvents to extract, process, and sell heavy oil. Having demonstrated pilot viability, Greenfield has subsequently begun to negotiate marketing contracts for refining and marketing asphalt, heavy oil and diesel. The potential future mining operations and extraction processes at TSHII are also intended to produce various types of sand as byproducts, and Greenfield has identified markets for the industrial, construction, fracture stimulation ("frac") and silica sands.
NSAI estimate the net oil reserves, associated marketable sand volumes, and future net revenue in respect of the gross (100 per cent.) interest in the TSHII properties, as of 31 December 2021.
In accordance with the 2018 PRMS definitions and guidelines, one of the primary requirements for oil and gas volumes to be classified as reserves is that they be commercially recoverable. For the purposes of its Report, NSAI evaluated a sensitivity to the project wherein costs are incurred to dispose of 100 per cent. of the mined sand volumes rather than including revenue from selling 95 per cent. of it. In this sensitivity, based on the oil prices and costs assumed (as described further below), the project is still commercial at the 1P, 2P and 3P levels.
Reserves categorisation conveys the relative degree of certainty; reserves subcategorisation is based on development and production status. The 1P volumes are inclusive of proved undeveloped volumes only. The Report indicates that as of 31 December 2021, there are no developed oil reserves or associated marketable sand volumes for the TSHII site. For the purposes of the Report, the volumes and parameters associated with the proved, proved plus probable, and proved plus probable plus possible estimate scenarios of reserves are referred to as 1P, 2P and 3P, respectively. The estimates of oil reserves, associated marketable sand volumes, and future net revenue included have not been adjusted for risk. The Report does not include any value that could be attributed to interests in undeveloped acreage beyond those tracts for which undeveloped oil reserves and associated marketable sand volumes have been estimated.
Gross revenue in the Report is the gross (100 per cent.) revenue from the properties prior to any deductions whereas future net revenue is after deductions of production taxes, capital costs, abandonment costs and operating expenses, but before consideration of any income taxes. The future net revenue has then been discounted at an annual rate of 10 per cent. to determine its present worth.
The Report was prepared using oil and marketable sand price parameters specified by TomCo. The future oil produced and processed through mining operations is assumed to yield three distinct products including asphalt, heavy oil, and diesel. The asphalt price is based on the Argus Asphalt Index price of US$93.64. Heavy oil and diesel prices are based on the 1 December 2021, West Texas Intermediate posted price of US$62.05 and are adjusted for quality and market differentials. Sand produced through mining operations is assumed to be processed and sold as four distinct products (industrial, construction, frac and silica sands). Sand prices are based on the 2019 United States Geological Survey prices for each product.
Operating costs used in the Report are based on the projected costs of upscaling pilot mining operations provided by TomCo. These costs include TomCo's estimates of its administrative costs. Capital costs used in the Report were also provided by TomCo and are based on the projected costs of upscaling pilot mining operations. Capital costs were included for the planned construction of a processing plant, production facilities and equipment. Based on its understanding of the Company's future development plans and review of the information provided by TomCo, NSAI regarded the estimated capital costs to be reasonable. Abandonment costs used in the Report are TomCo's estimates of the costs to abandon the future production facilities, net of any salvage value. None of the costs were escalated for inflation. Greenfield is engaged in ongoing discussions regarding funding options to potentially achieve the ultimate acquisition of 100% of the Membership Interests, whilst progressing other preparatory work. However, there can be no certainty that Greenfield can secure the requisite funding for such acquisition.