24 March 2016
Red Rock Resources plc
('Red Rock' or the 'Company')
Shoats Creek Update
2016 Work Programme
Further to the announcements of 2 and 22 February 2016, and 7 March 2016, Red Rock announces that the 2016 work programme at Shoats Creek Field has now been finalised.
The spud date for drilling of the Lutcher Moore 21 well ('LM 21') has been set for on or around May 16, 2016.
Following discussions with Shoats Creek Development, Inc. ('SCDI'), the operator of the field, the agreed work programme consists of activities to grow production as well and to add high grade potential locations.
Highlights
The 2016 work programme is as follows:
· Drilling and completion of three new producing wells drilled to a targeted depth of 5500 feet to test multiple Frio sands at approximately 5000 feet
· Re-entry of and installation of equipment to support production from one existing Cockfield well
· Re-entry and conversion of an existing well bore to a second salt water disposal well (in addition to the Lutcher Moore 15 well) to provide for expanded capacity and redundancy to the existing salt water disposal well
· Negotiation of a natural gas contract and installation of necessary equipment to permit sales of natural gas
· Leasing of an additional 500 to 700 gross acres to expand the project area and provide additional prospective drilling locations
· Additional geophysical and engineering work to high grade existing and add additional Cockfield locations in anticipation of including Cockfield drilling in the 2017 work programme
SCDI has submitted Authorizations for Expenditure ('AFEs') for the following works:
- Pad site preparation, drilling and completion of the LM 21 and Lutcher Moore 22 ('LM 22') wells which are to be drilled consecutively
- Lease, environmental and permitting costs associated with preparation to drill the Lutcher Moore 23 well in the fall of 2016
- Re-entry and conversion of the LL&E 1 well to salt water disposal ('SWD') as well as miscellaneous costs associated with development and production of the Shoats Creek Field
Red Rock's net share of costs associated with these activities is approximately $US495,132. This will be funded from the proceeds of disposals, cash flows, and cash resources. Red Rock expects that at current oil prices and with a conservative production profile the net programme exposure will peak at approximately $393,000 in Q2 of 2016 as project revenues come on stream.
The Lutcher Moore 21 & Lutcher Moore 22 Wells
The LM 21 will be a twin to the Lutcher Moore 8 ('LM 8'). The LM 8, originally drilled in 1950 to 9136 feet, was originally completed in the Cockfield-5 and initially produced 185 barrels of oil per day ('BOPD')and 185 mcf per day of natural gas with no water. The logs indicate Frio pay to be targeted from 5029-5036 feet.
In 1991 an unsuccessful squeeze and recompletion on LM 8 in the Frio was attempted, and the well continued to suffer from water and sand issues. As the LM 8 was a 40-year-old well when the failed squeeze was attempted, this was a difficult mechanical challenge.
The completion programme implemented on the LM 20, using stronger, higher quality casing and rotation of casing while cementing to get a smooth even bond over the pay zone, will be implemented on both the LM 21 and LM 22 wells.
The LM 21 will be located to the northwest of the LM 8 to position the well structurally higher in the formation to potentially get updip to and intersect a thicker payzone than the LM 8.
The LM 22 well is being planned to start immediately following, but subject to successful completion of, the LM 21. Further detail regarding the LM 22 will be provided in due course.
The Company's Chairman, Andrew Bell comments:'We are pleased by the results we have seen to date in the Frio formation, and we are excited that the opportunity is now being presented to participate equally in the deeper Cockfield formation, which has been the most significant oil and gas producer in this area and which we expect will be a key pay zone for Shoats Creek as well.
The 2016 exploration programme at Shoats Creek constitutes bottom-of-the-cycle investment in inexpensive onshore US oil production taking advantage of the significant decline in development costs during the industry downturn. With a strong group of investors now in place including our partners at Northcote Energy Ltd and Gulf Coast Western, Shoats Creek will be developed aggressively across multiple oil horizons and this will be a key component of the Company's growth during the year. '
Qualified Person
The technical information that is contained in this announcement has been reviewed by Mr. Kevin Green, a Petroleum Geologist who is a suitably qualified person with over 30 years' experience in assessing hydrocarbon reserves and who has consented to the inclusion of the technical information.
For further information, please contact:
Andrew Bell0207 747 9990 ChairmanRed Rock Resources Plc
Scott Kaintz0207 747 9990 DirectorRed Rock Resources Plc
Roland Cornish/ Rosalind Hill Abrahams0207 628 3396 NOMADBeaumont Cornish Limited
Jason Robertson0129 351 7744 BrokerDowgate Capital Stockbrokers Ltd
Glossary:
BOE: barrels of oil equivalent, gas is converted at its energy equivalent of 6000 cubic feet per barrel of oil
BOEPD: barrels of oil equivalent per day
BOPD: barrels of oil per day, abbreviation for barrels of oil per day, a common unit of measurement for volume of crude oil. The volume of a barrel is equivalent to 42 US gallons
Mcfd: Thousand Cubic Feet per Day
NRI: Net Revenue Interests
Oligocene: a geologic epoch that extends from about 33.9 million to 23 million years before the present
Pay or Payzone: an interval within a rock formation that contains quantities of hydrocarbons thought to be economically viable. This interval is commonly determined using various logging tools run by the operator prior to making the decision to complete a well for production.
Squeeze and recompletion- the application of cement into a zone expected to be leaking water into a well bore