Reabold Resources PLC (LON:RBD) Co Chief Executive Officer Sachin Oza caught up with DirectorsTalk for an exclusive interview to discuss the progress at West Newton and provides an update on their Californian assets.
Q1: Some good news over at West Newton, can you provide is with some background on the recently announced spud over there?
A1: The West Newton A-2 well is on-shore UK in East Yorkshire on licence PEDL183. The original discovery well that was made on West Newton was by the Connaught management team in 2014, they made this discovery in a geology that really was not substantially exploited in the UK but has been heavily developed in Continental Europe. The estimated reserves on that discovery well in the gas was 189 BCFe which is approximately 30 million barrels of oil equivalent, has an associated NPV of $247 million and has a chance success of around 72%.
So, all of that means it is a very significant gas discovery that we will be appraising as part of this programme but also, there is an exploration element in the oil because in the original well that was drilled there was a strong indications of oil but it was found in poorly developed reservoir rock.
So, the objective of the exploration part of this well is to look at that oil in more detail and really determine whether there is the potential resource there for 80 million barrels with an associated NPV of $150 million. As I said, not only is the gas itself very substantial but so too is the oil and it would make this one of the largest ever discoveries onshore UK.
Now, the Reabold Resources’ exposure to this whole project is effectively 25% look-through interest on the licence and that is through our ownership of the operator Rathlin, and Rathlin itself own 66% of the licence.
We expect that the well will take 40 days to complete, however during this period of time we may have indications, as I talked about, from gas which will be going through first and then subsequently the oil. If there’s any information during that period of time that we deem to be significant then it’ll have to be disclosed to the market during the drilling.
So, an exciting opportunity and we really look forward to updating the market in due course on that.
Q2: What is likely to be the forward plan for the field, post the well?
A2: Really, the objective of this well is to define what the development plan will look like. The West Newton field is strategically located in this location onshore UK because there’s an abundance of gas infrastructure as well as oil refinery.
So, for instance, on the gas side there’s the Easington Gas Terminal, a gas gathering facility collecting all of the offshore UK gas and bringing it onshore, there’s the Aldbrough gas storage facility and a number of combined cycle gas-fired power stations and all of them are hungry for this gas. What that means is, any gas discovery can be readily and quickly developed but also there is, as I said, the ability to access oil refineries if the oil is successful.
Just again, to give an example of the options that are available to us. If the oil turns out to be successful then that will be prioritised as a development because we can accelerate cash flow and generate value from that and then go to the gas after that.
All of the questions associated with what the best development plan looks like will really only be determined after we get the results from the testing of this well.
Q3: Can you provide us an update on California?
A3: We’re very pleased with the activity that we’ve carried out in California so just as a reminder there, Reabold Resources have 4 wells that have been drilled, and successfully drilled, all of which are discoveries. 2 were put onto production on the West Brentwood field, that’s VG-3 and VG-4 and the testing of the first part of the programme for the 2 success wells that were made on the Monroe Swell field.
So, going to the West Brentwood field first, we have put VG-4 onto production and it is on constrained production because there is a substantial amount of gas that is produced as part of that field. We can’t just flare the gas so we need to be able to tie that into a pipeline that is nearby and we’re in the process of doing that, at which point, we can start to run the VG-4 well at an unconstrained rate. So, it’s currently, as we last announced, between 150-250 barrels a day with the associated gas, hopefully once we tie that in, we can get back to being closer to the test results which were materially higher and then start generating even higher amounts of cash flow from the VG-4 field.
What we’ve also done, as I said, is started the testing programme associated with the Monroe Swell discoveries. Just as a quick bit of background, the way this works is we first drill the discovery wells, identify the horizons of interest, bring in a workover rig and then perforate the intervals that have shown to have pay in them and then start testing those.
We’ve started at Burnett 2B and we’ll move onto the Burnett 2A, we’ll update the market in due course as we get the results from that but we are clearly very excited by the expeditious wave of activity that we’ve carried out in California and look forward to further successes in the future.
We also have a well lined up in California on Grizzly Island which is a completely different field to the other two that I’ve mentioned. That’s targeted for later this year and it’s a big bang gas opportunity, more exploration in nature but certainly it just shows the running rooms and set of opportunities we have in the region.