Reabold Resources Plc (LON:RBD) Co Chief Executive Officer Stephen Williams caught up with DirectorsTalk for an exclusive interview to discuss their latest California update, what we can expect going forward and the progress of their other assets outside of California.
Q1: We’ve just seen your Reabold California update, can you talk us through the significance of the announcement and what this actually means for the California projects?
A1: What we did is we made an announcement in relation, primarily, to our Monroe Swell asset which is the prime asset out in the California portfolio.
We drilled 2 wells at Monroe Swell, we’d already announced they were both discoveries and because we had the opportunity to drill them back-to-back, you get 2 wells rather than 1 and accelerate activity there.
We then subsequently tested them both together and we’ve just completed that testing programme and the significant announcement that we made today is that we can confirm we’ve got commercial flow rates coming out of both of those wells.
So, this is extremely significant for us firstly because these wells in their own right will be economic wells and are going to generate a very good return for our shareholders and generate a lot of cash flow for us that we can then deploy into the business. Just as importantly, it’s clearly gone another step towards de-risking Monroe Swell as a whole, Monroe Swell is an asset with a lot of running room and we expect to have a lot of activity going forward.
Clearly, we’re very excited that these wells have worked out so well and that we have something that’s so valuable in that asset and we’re extremely excited in general with what we’ve been able to achieve in California so that’s four wells drilled now and all four have been successful.
So, it’s proving that the strategy is working, that the assets are highly valuable and it’s giving us what’s going to be a very high cash generative business to underpin the company strategy going forwards.
Q2: Talking about going forward, what can we expect from Monroe Swell?
A2: We’ll get these 2 wells onto production and we’ll inform the market when that’s done and what the flow rate is once they’re on permanent production then we’ll be looking at when we can get on with drilling additional wells there.
So, the key point about Monroe Swell is there’s a lot of running room in terms of the ability to put additional wells into that field so it’s always been a field where we’ve expected to have maybe 10/12 wells, that order of magnitude on this asset. As I said earlier, it’s been de-risked by these 2 so we’re extremely confident that we’ll be able to deploy those wells successfully.
The plan is to get the early production data on these wells and then work out what the optimal location is for the next one and to get on with drilling out these field and growing production and cash flow.
Q3: What’s next for the company’s California portfolio?
A3: We were delighted to be able to inform the market of the production that we’ve had with both VG-3 and VG-4 producing recently, but it’s key to remember that VG-4 has been producing at a constrained rate.
So, VG-4, when we tested it, was a well that tested at around 500 barrel a day mark, an extremely prolific well and it was so prolific that the associated gas that was coming up with that production was too much for us to put this well into production and flare the gas.
We are working on final stages of tying in a gas line which will connect to VG-4 into the gas network and allow us then to produce VG-4 at unconstrained rate so that will see a meaningful increase in our production coming out of the West Brentwood field, out of VG-3 and VG-4.
So, what we’ll have in the near-term is a higher rate of production coming out of those wells, we’ll have the 2 wells producing at Monroe Swell and we’ve also got additional production coming out of the wells we worked over at Monroe Swell last year.
So, we’ll have a meaningful amount of production and, as I mentioned earlier, a meaningful amount of cash coming back from these assets and that will allow us to grow the California business. What is so important about the business we’ve built in California now is that it’s generating sufficient cash that we can use that cash to go and drill additional wells.
As I said, we’re looking at certainly drilling more wells at Monroe Swell but also look at the potential of drilling again at West Brentwood and also, we’ve got Grizzly Island which his another asset entirely. We haven’t drilled the first well into yet, that’s a very big asset, if that’s successful that will be extremely important to us as well and we’ll be drilling that this year too.
In addition to all of that, it probably won’t surprise people to know that we are looking at the potential to add to our asset base in California and we think there is the opportunity to bring additional assets into that portfolio to grow the business even more.
Q4: What’s happening elsewhere within Reabold Resources, in more broad terms?
A4: Outside of California, the most immediate event is the current drilling of the West Newton appraisal well which is onshore UK, up in Yorkshire, we’re drilling that well right now, our initial results will be available very soon. This is really, in the event of successes, a gamechanger for the company, in fact I would say this is a gamechanger for the UK onshore oil and gas industry in the event of success here.
It’s an extremely large gas target which we’re appraising and there’s an oil exploration element to this well in addition to that, both hare being tested by this well so two very important data points that will be coming out very soon. That’s an extremely exciting time waiting for those results to come in.
On top of that, following that, we also have our business in Romania and we’ll be drilling the first well in Romania shortly after the West Newton appraisal well is done. That, again, is a very attractive asset, it’s re-drilling a historical discovery so in that sense it’s extremely low risk as far as pre-cash flow asset go and we think Romania is an extremely attractive country to be operating in and there’s a lot of running room available on that license area. So, it’s not just the single well type event, that’s the start of a business in Romania that we think can go a very long way.
So, lots going on, lots of drilling activity and no slow-down in the drilling activity that we’ve been delivering over the last few months and there’s lots more wells to go. The success in California is really underpinning the financial strength of the company which really allows us to just keep rolling out this strategy.