CPR confirms prospectivity of Danica Resources Project

Wednesday, January 25, 2012
  • New World Oil and Gas Plc has received a Competent Person's Report ('CPR') from RPS Energy ('RPS') highlighting the prospectivity of the Danica Resources Licence 1/08.

This covers an area totalling 6,420 sq km, and includes both onshore and offshore acreage in Southern Denmark in the productive Western Baltic region of the South Permian Basin ('the Danica Resources Project'). The project is New World's third since listing on AIM in May 2011.

Further to receiving the results of the CPR, the Company anticipates negotiating and finalising the definitive transaction agreements, in the form of a Farm-Out Agreement, with the current operator of the Licence, Danica Resources ApS, as well as an amendment to the underlying Joint Operating Agreement naming New World's Danish subsidiaries as parties and operator.

Key findings of the CPR:

  • Licence 1/08 located in an under-explored area in Southern Denmark and on trend to the west of the well-established northern platform edge of the Southern Permian Basin ('SPB')
  • The Licence is on trend with an analogous geological setting, 20km to the west of several producing Zechstein oil and gas fields
  • Features visible on the available seismic data have potential to be reefal build-ups - further seismic coverage will ascertain whether the geometrics of the identified leads support the hypothesis of reefal build-ups and/or carbonate shoals
  • Providing drilling is successful and the reefs and or shoal facies can be proved, RPS state it is likely that they will make excellent reservoirs
  • Next step to acquire further 2-D seismic to identify a robust prospect(s) and reduce the current geological risk from 1 in 12 to approximately 1 in 8 for the Zechstein
  • Danica Resources ApS has identified 15 leads in the Triassic Bunter Sandstone and seven leads (four onshore, three offshore) and one prospect - the Als prospect in the Zechstein that could share similar properties to producing fields in Germany and Poland
  • The Als prospect, located in the far west of the Licence, has two target horizons, the Zechstein and the Rotliegendes
  • Results for the Als Prospect (reported on a gross 100% working interest basis):

    • Zechstein

      • Prospective volumes: P90 40MMbo; P50 97MMbo; P10 192MMbo
      • Indicative Success Case NPV10 values: P90 US$419MM; P50 US$1.039 Billion; P10 US$2.007 Billion
      • Rated 1 in 8 probability of geologic success by RPS

    • Rotliegendes

      • Prospective volumes: P90 575 Bcf; P50 1.401 Tcf: P10 3.380 Tcf
      • Indicative Success Case NPV10 values: P90 US$569MM; P50 US$1.400 Billion; P10 US$3.310 Billion
      • Rated 1 in 9 probability of geologic success by RPS

  • Both intervals on the Als prospect can most likely be targeted from an onshore location and may well make the prospect 'drill-ready'
  • The Lower Triassic Bunter Sandstone, a productive reservoir in various fields in Europe, and the Upper Triassic Gassum Sandstone intervals can be considered likely reservoirs
  • According to RPS, seal issues do not present a major risk to any of the potential reservoirs although each individual prospect, as they are worked up, will need to be evaluated on an individual basis
  • RPS' opinion is that this is an interesting opportunity to assess early to mid- stage exploration in a well thought through but, as yet, unproven extension to a number of potential plays. As such the terms and forward commitments are appropriate to high grade the existing leads into drillable prospects subject to positive results

Note: As referred to below, New World will on execution of definitive agreements have an option to obtain up to an 80% working interest ('WI'), with the initial 12.5% WI to be earned following completion of a 150 km 2-D seismic programme due to be completed by 30 September 2012.

RPS will be providing updates to this report as New World completes its future acquisition and interpretation of additional 2-D seismic and combines this data with pre-existing data in an effort to further enhance the subsurface interpretation and further reduce and quantify risk. New World hopes to elevate the prospectivity of the Danica Resources Block to a drillable status upon completion of a 150km 2-D seismic programme.

New World CEO William Kelleher said, 'We are highly encouraged by the results of this CPR, which confirms the essential findings of the Petroleum Engineer's report issued on 12 January 2012. The results provide significant evidence pointing to the presence of a working hydrocarbon system, underpinning our belief that the Danica Resources Project is located in a productive and highly prospective region. Based on these results, we will immediately proceed to negotiate and finalise the definitive transaction agreements, in the form of a Farm-Out Agreement, as well as an amendment to the underlying Joint Operating Agreement naming New World's Danish subsidiaries as parties and operator.

'The permitting process for 2-D seismic acquisition will begin in April 2012 and we expect to complete data acquisition for the first phase of the seismic programme by September 2012. We anticipate providing regular updates on our operations and results of the seismic interpretation as they become available.

'In the meantime, we continue to progress our other highly prospective projects including our Blue Creek Project in Belize where we have already identified two prospects with a 1 in 5 Probability of Geologic Success. At our Danica Jutland Project we remain on course to commence a seismic programme in Q2 2012. I look forward to updating shareholders on our progress.'

The conclusions section of the CPR is reproduced in its entirety below:

New World has the option to earn up to 80% WI and become Operator in the 1/08 licence, onshore/offshore southern Denmark (subject to government and partner approval).

The licence is located in an under-explored area and on trend to the west of the well-established northern platform edge of the Southern Permian Basin. The current licence Operator, Danica Resources, has developed a geological model which draws on their extensive research and experience of the SPB to explore this potential extension to the established play.

In our opinion, this is an interesting opportunity to access early to mid stage exploration in a well thought through but, as yet, unproven extension to a number of potential plays. As such the terms and forward commitments are reasonable, manageable and appropriately scaled to high grade the existing leads into drillable prospects should the results prove positive.

The plan to acquire more seismic is an essential next step to identify a robust prospect (or prospects) but elements of the remaining geological risk will only be mitigated by drilling one or more wells. Key risks are the presence of reservoir quality rocks in the Zechstein and robust structural closure in the Rotliegendes and Triassic. All three plays have an element of trap, source and migration risk.

The planned acquisition of seismic and the identification of robust structures could reduce the current geological risk to approximately 1 in 8 (or better) for the Zechstein and Rotliegendes as has been proved for the Als Prospect.

The Als Prospect could benefit from further seismic data to prove the closure at both Zechstein and Rotliegendes intervals but, given the relative cost of seismic data versus that of drilling a well, it may well be the case that the value of data regarding the reservoir quality and potential hydrocarbon content may well make the Als Prospect 'drill-ready', particularly as both intervals can most likely be targeted from an onshore location.

The scoping economics run on the Als Prospect suggest that even a moderately sized discovery could be highly economic under the current terms and conditions.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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