Wentworth Resources Limited : Corporate, Operational and Resource Update
3 October 2018
WENTWORTH RESOURCES LIMITED
(“Wentworth” or the “Company”)
Corporate, Operational and Resource Update
Transition and Redomicile of the Company
As announced on 2 October 2018, following the Company’s Special Meeting, and in line with the head office relocation of the Company from Calgary to London previously announced, the re-domicile of the Company to Jersey is progressing on schedule. Following the Special Meeting and the passed resolution related to the Continuance, the Company will now apply to:
The Registrar of Corporations in Alberta to grant a certificate of discontinuance; and
The Jersey Financial Services Commission for their approval of the Continuance.
The Company will also submit a Schedule 1 Pre-Admission Announcement, in order for the Company’s shares to be re-admitted to AIM in late October 2018, under the name Wentworth Resources plc and the new TIDM of WEN. On completion of the Continuance, the Proposed Directors, as previously announced, will be appointed to the Board of Wentworth Resources plc.
Delisting from Oslo Børs
Further to the Special Meeting and the resolution passed related to the application to de-list from Oslo Børs, the Company will shortly submit the delisting application to the Oslo Børs. The Company will make a further announcement, including expected timetable, in respect of this process in due course.
Payment and Production update
The Company is pleased to inform shareholders that payments received for September 2018 gas sales generated from the Mnazi Bay Concession in Tanzania totaled $3.24 million net to Wentworth. Payments were received from both Tanzania Petroleum Development Corporation (“TPDC”) and Tanzania Electric Supply Company Limited (“TANESCO”) for one month’s gas sales to TPDC and one month’s gas sales to TANESCO.
The Company also reports that gross production volumes during September 2018 from the Mnazi Bay concession averaged 83.2 MMscfd. The September reduction in production volumes (August average of 87.9 MMscfd) was due to previously planned slick-line activities on the wells and TPDC hot-tapping operations for the Lodhia Steel works offtake.
Given the consistency of payments received to date in 2018, the Company no longer intends to release monthly updates to the market. Such information will be included in regular Corporate and Operational activity RNS updates.
Tanzania: Mnazi Bay PSA
The Mnazi Bay Production Sharing Agreement (“Mnazi Bay”), is located onshore southern Tanzania (Mtwara region), approximately 410 km south of Dar es Salaam, covering an area of 756 km. The Mnazi Bay asset is operated by Maurel et Prom (48.06%) with the Tanzania Petroleum Development Corporation “TPDC” (20%) and Wentworth Resources (31.94%) as joint venture partners.
The Mnazi Bay & Msimbati gas fields have been onstream and continuously producing since January 2007, initially through a testing and commissioning phase at c.2.5MMscfd to Mtwara. In October 2015, the Madimba gas processing plant was completed and commissioned, allowing production to be ramped up to 44 MMscfd in 2016. Production continued to grow to c.50 MMscfd in 2017. In 2018 production has averaged 82 MMscfd year to date and 86 MMscfd in Q3, from five producing wells. The Joint Venture is contracted (“DCQ”) to supply 82.5 MMscfd, with a Gas Sales Agreement (“GSA”) option to increase to 130 MMscfd.
The increase in production to the current plateau levels, has resulted in operating expenses being reduced from $1.16/Mscf in H1 2017 to $0.43/Mscf in H1 2018, as the mainly fixed costs are distributed over a larger production base.
Within Tanzania, Mnazi Bay is currently the pre-eminent domestic gas to power (“GTP”) supplier, with a c.53% market share. Tanzanian power generation capacity is currently c.1,500 MW, with some 780 MW derived from Natural gas.
Demand for Mnazi Bay gas is currently in excess of 95 MMscfd. Future demand is ramping up significantly, with Mtwara, Sumanga-Fungo, Kinyerezi III and Kinyerezi IV power plants all planned, with a projected combined additional demand of 180 MMscfd. To the Company’s knowledge, there are currently no uncommitted onshore 2P gas reserves to supply the near to mid-term demand requirements.
As part of the redomicile and AIM re-admission process, the Company commissioned an RPS Canada Competent Persons Report (“CPR”) evaluation of the Mnazi Bay field’s reserves which has resulted in gross 2P reserves of 541 Bscf of gas, with 111 Bscf of net attributable 2P reserves to Wentworth Resources (with an effective date 31 May 2018). The NPV of the 2P reserves (net to Wentworth) was estimated at $121 million USD after tax (on a life-of-field basis). RPS Canada estimated the upside reserves potential (3P) for the Mnazi Bay field at 817/152 Bscf (gross/net). This CPR is available on the Company’s website as of today and a reserves summary table follows below.
| Oil and Gas - Reserves at 31 May 2018
Mnazi Bay Licence, Tanzania |
| | Gross | Net Attributable | Operator |
| | Proved | Proved + Probable | Proved + Probable + Possible | Proved | Proved + Probable | Proved + Probable + Possible |
| Oil & Liquids Reserves | MMstb | MMstb | MMstb | MMstb | MMstb | MMstb | |
| Mnazi Bay Gas Field | - | - | - | - | - | - | Maurel et Prom |
| Total for Oil and Liquids | - | - | - | - | - | - | |
| | | | | | | | |
| Gas Reserves | Bscf | Bscf | Bscf | Bscf | Bscf | Bscf | |
| Mnazi Bay Gas Field | 295 | 541 | 817 | 69 | 111 | 152 | Maurel et Prom |
| Total for Gas | 295 | 541 | 817 | 69 | 111 | 152 | |
“Gross” are 100% of reserves attributable to the asset
“Net Attributable” are the net reserves volumes attributable to Wentworth
Activity & Production Outlook
Given the field is producing on plateau from the current well stock, Joint Venture technical and operational activity has focused on better understanding in-place volumes, reservoir connectivity, future production profiles, outlining infill well locations and defining additional exploration potential on the block. These initiatives combine to ensure an integrated and pro-active field management strategy moving forwards.
From late August to early September 2018, slickline operations were performed in the MB-2, MB-3, MB-4, and MS-1X wells to remove downhole memory gauges, perform static pressure gradient surveys, and re-install downhole memory gauges. This pressure monitoring campaign is ongoing and will help to address the remaining uncertainty with regards to the in-place (and recoverable) volumes in the Mnazi Bay field and the connectivity between the wells in the different reservoir intervals, with particular near-term focus on the lower MB interval, currently producing from the MB-1 well only.
Critically, the Mnazi Bay partners are working closely together to ascertain production profiles and plateau periods that can be achieved for different recoverable volumes, flow rates, pipeline inlet pressures and compression scenarios. The results from this work suggest that at current stabilized production of 82.5-90 MMscfd, the plateau can be maintained until sometime between mid-2024 and late-2026, with limited capital expenditures (“CAPEX”). Although the GSA provides the option for volumes of up to 130 MMscfd to be delivered, the Company does not believe this will be achieved until certain commercial conditions have been satisfied.
In order to increase field production rates closer to a 130 MMscfd plateau, while still maintaining the capability to provide minimum contractual volumes of 80 MMscfd to Madimba (TPDC) and 2.5 MMscfd to Mtwara (TANESCO), Wentworth believes that additional well recompletions and/or drilling and compression facilities will be required in due course.
In order to sustain and/or increase the Mnazi Bay production plateau Wentworth (along with the Operator) is focused on four key value catalysts:
Securing a full GSA to move to Commercial Operations Date “COD” declaration. As a result of the COD, the testing and commissioning period will end and all terms of the GSA will become effective.
Maintaining the production plateau to comply with the GSA, by focusing on network modifications including upgrading well flowline chokes, together with slickline jobs to open existing perforated intervals and conducting new perforations in unperforated horizons. This is made operationally simpler by the MB-2, MB-3, MB-4 and MS-1X wells having smart well completions, with sliding sleeves.
A reduction in the contractual optimum pipeline delivery point pressure from 95 bar(g) to 60 bar(g), which would allow for increased volumes per well, and sustained overall production rates and/or plateau periods from the current well stock, prior to installation of compression facilities. This is technically and operationally realizable, has the potential to extend the production plateau by c. 18 months on a standalone basis and c.42 months including slickline and chokes upgrade work; and is immediately accretive to asset value.
Renewal of the PSA, which will push expiration out a further 10 years, until 2041, thereby facilitating the commercial rationale for additional CAPEX to unlock the 2C and the 3P resource base.
Unlocking these commercial triggers will allow the Joint Venture to extend and increase the current production plateau of 82.5-90 MMscfd with confidence, as well as access, unlock and convert the existing material prospective resource base to 2P reserves. Discussions are ongoing between the Joint Venture and various Tanzanian stakeholders to secure fair and equable agreement on these issues.
Wentworth has undertaken a detailed review of the exploration potential of the greater Mnazi Bay area and as such has identified a material prospect and lead inventory. Seven of the highest potential leads were evaluated by RPS Canada as part of the reserves and resources evaluation, which ascribed P full block gross prospective resources at greater than 1.5 Tcf. Wentworth is currently working with the operator to determine how to best de-risk the running room portfolio and developing a strategic plan towards converting these resources to future 2C and 2P reserves.
Mozambique: Tembo Block Appraisal Licence
The Tembo Block Appraisal Licence (“Tembo”), which has an area of approximately 2,500 km is located in north-eastern Mozambique, approximately 1,800 km north of Maputo and 100 km southwest of the Mnazi Bay field in the onshore Rovuma Basin. The block is operated by Wentworth Resources (85%) with Empresa Nacional de Hidrocarbonetos (“ENH”; 15%) as a carried partner.
In 2014, the Tembo-1 exploration well was drilled to the Cretaceous where it encountered strong gas shows, logged a hydrocarbon pay interval section, and was declared a technical discovery. In June 2016, the Instituto Nacional de Petroleo (“INP”) granted approval for an appraisal plan for the Tembo-1 gas discovery, with a two-year appraisal period. During the first two-year appraisal period Wentworth reprocessed c. 1,000 km of 2D seismic data and conducted pre-drill activities including well planning and design and scouting of the proposed wellsite location. In addition, from late Q4 2017 the Company reached out to the market to secure a partner to farm-in for the proposed Tembo-2 appraisal well. In June 2018, partly due to above ground security issues and an inability to secure a risk-sharing partner, a further one-year extension was granted, extending the licence until 15 June 2019 with no additional work commitments or exit penalties.
Activity & Outlook
In Q3 2018, Wentworth commenced a detailed re-evaluation of the Tembo discovery, creating an updated basin model which integrated in-house analysis of the Tembo-1 discovery, including re-interpretation of all the existing block and regional 2D seismic data, reservoir & rock properties, in-place and recoverable volumes, reservoir flow rates, deliverability and well-based economics. This in-house study, which was concluded after the RPS CPR evaluation was finalized, suggests that the primary “Q sand” package as mapped on the reprocessed 2D seismic likely has in-place Pmean gross volumes of c.87 Bscf with recoverable volumes of c.61 Bscf.
Set out below are management estimates of Prospective Resources Assessment for the Tembo prospect.
| Oil and Gas - Prospective Resources
Tembo Appraisal Area, Mozambique |
| | Gross | Net Attributable | Risk Factor | Operator |
| Proved | Proved + Probable | Proved + Probable + Possible | Proved | Proved + Probable | Proved + Probable + Possible |
| Oil & Liquids Reserves | MMstb | MMstb | MMstb | MMstb | MMstb | MMstb | | |
| | - | - | - | - | - | - | | |
| Total for Oil and Liquids | - | - | - | - | - | - | | |
| | | | | | | | | |
| Gas Reserves | Bscf | Bscf | Bscf | Bscf | Bscf | Bscf | | |
| Tembo Q Sand Prospect, Base of Slope Fan | 10 | 61 | 151 | 9 | 52 | 128 | 42.1% | Wentworth |
| Total for Gas | 10 | 61 | 151 | 9 | 52 | 128 | | |
Management internal estimates
“Gross” are 100% of resources attributable to the asset
“Net Attributable” are the net resources volumes attributable to Wentworth
“Risk Factor” is the Geological Probability of Success and does not include any evaluation of the commerciality of the resources.
The downward volumetric revisions have predominantly been driven by a decrease in the interpreted reservoir storage properties and a more restricted sand fairway system. The Company is of the view that a gas discovery of this size with sub-commercial flow rates is highly likely to be stranded given the lack of adjacent infrastructure.
As part of the Company’s Transition and Redomicile process, RPS Canada was required to conduct a CPR of the Tembo discovery. This evaluation which commenced in May 2018, was undertaken incorporating a legacy subsurface model, prior the above in-house evaluation.
RPS Canada, has determined, based on the prior Wentworth work that the Tembo prospect has Best estimate P gross risked prospective resources of 262 Bscf, with a 30% chance of expected Commercial success, further noting “there is a wide range of uncertainty in the estimated volume”. This CPR report is available on the Company’s website as of today.
The updated in-house assessment of Tembo, coupled with the lack of a risk-sharing partner and above ground concerns, all point to further appraisal well activities not being commercially supported by the Company.
Wentworth continues to evaluate remaining Cretaceous and Tertiary potential in the greater onshore Rovuma Basin as part of its evaluation activities in Mozambique, where it has a significant in-house data set, established regional expertise, operational capabilities, and importantly substantive relationships with ENH and INP, in what is a rapidly developing LNG (and domestic gas) region of Mozambique.
Eskil Jersing, CEO, commented: "Since my arrival in late June, we have undertaken a thorough technical review of the company’s asset portfolio. I am excited by the potential of Wentworth’s principal Mnazi Bay asset in Tanzania, and believe our focus is to work closely with the operator and key stakeholders in country to progress a value-led technical and operational strategy that extracts as much of the field’s undoubted potential as possible in a commercially attractive manner. Our work to better understand commercially realizable opportunities available in Mozambique continues unabated.
As a result of our having the corporate team in London working very closely with our Dar es Salaam team and asset partners, I believe we are now better placed to both drive the business operationally and communicate with our market, especially investors and analysts. In addition, our being in the UK will also enable us to access and execute on M&A led opportunities in order to secure accretionary value for the Company in this next phase of growth. I look forward to updating investors in due course.’
Wentworth | Bob McBean,
Chief Executive Officer
Chief Financial Officer | firstname.lastname@example.org
+44 7717 847623
+44 7841 087 230 |
| | | |
| Stifel Nicolaus Europe Limited | AIM Nominated Adviser and Broker (UK)
Ashton Clanfield | +44 (0) 20 7710 7600 |
| | | |
| Peel Hunt LLP | Broker (UK)
| +44 (0) 20 7418 8900 |
| Vigo | Investor Relations Adviser (UK)
Kate Rogucheva | +44 (0) 20 7930 0230 |
About Wentworth Resources
Wentworth Resources is a publicly traded (OSE: WRL, AIM: WRL), independent oil & gas company with natural gas production; exploration and appraisal opportunities, all in the Rovuma Delta Basin of coastal southern Tanzania and northern Mozambique.
The information contained within this announcement is deemed by Wentworth to constitute inside information as stipulated under the Market Abuse Regulation (EU) no. 596/2014 (“MAR”). On the publication of this announcement via a Regulatory Information Service (“RIS”), this inside information is now considered to be in the public domain.
Cautionary note regarding forward-looking statements
This press release may contain certain forward-looking information. The words “expect”, “anticipate”, believe", “estimate”, “may”, “will”, “should”, “intend”, “forecast”, “plan”, and similar expressions are used to identify forward looking information.
The forward-looking statements contained in this press release are based on management’s beliefs, estimates and opinions on the date the statements are made in light of management’s experience, current conditions and expected future development in the areas in which Wentworth is currently active and other factors management believes are appropriate in the circumstances. Wentworth undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless required by applicable law.
Readers are cautioned not to place undue reliance on forward-looking information. By their nature, forward-looking statements are subject to numerous assumptions, risks and uncertainties that contribute to the possibility that the predicted outcome will not occur, including some of which are beyond Wentworth’s control. These assumptions and risks include, but are not limited to: the risks associated with the oil and gas industry in general such as operational risks in exploration, development and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the imprecision of resource and reserve estimates, assumptions regarding the timing and costs relating to production and development as well as the availability and price of labour and equipment, volatility of and assumptions regarding commodity prices and exchange rates, marketing and transportation risks, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in applicable law. Additionally, there are economic, political, social and other risks inherent in carrying on business in Tanzania and Mozambique. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. See Wentworth’s Management’s Discussion and Analysis for the year ended December 31, 2017, available on Wentworth’s website, for further description of the risks and uncertainties associated with Wentworth’s business.
These assessments are made in accordance with the standard defined in the SPE/WPC Petroleum Resources Management System (2007) and the Canadian Oil and Gas Evaluation Handbook (“COGEH”).
Cameron Snow, Head of Subsurface and Business Development, and an Exploration Geoscientist with over 12 years of experience across North America, South America, Africa, and Australia, has read and approved the technical disclosure in this regulatory announcement. Mr. Snow holds a BS in Geology from North Carolina State University, a MS in Geology from Utah State University, a PhD in Geological and Environmental Science from Stanford University, and an MBA from Imperial College of London. Mr. Snow is a member of the Society of Petroleum Engineers.
| Bscf | Billion standard cubic feet |
| Contingent Resources | Quantities of petroleum estimated, as at a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies |
| MMscfd | Milion standard cubic feet per day |
| MMstb | Million stock tank barrels |
| MW | Mega Watt |
| Gross Reserves | Reserves volumes before deductions for royalty |
| Net Reserves | Reserves volumes after deduction of royalty |
| NPV | Net present value |
| 2C | Best estimate scenario of contingent resources |
| 1P | Proved Reserves, those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations. |
| 2P | Proved + Probable Reserves, those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves |
| 3P | Proved + Probable + Possible Reserves, those additional reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves. |
| Prospective Resources | Petroleum deposits that are estimated, on a given date, to be potentially recoverable from accumulations yet to be discovered |
| Reserves | Quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. |
| TCF | Trillion cubic feet |
| WI | Working interest attributable to Wentworth |
Neither the Oslo Stock Exchange nor the AIM Market of the London Stock Exchange has reviewed this press release and neither accepts responsibility for the adequacy or accuracy of this press release.
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
181003 Press Release Update
This announcement is distributed by West Corporation on behalf of West Corporation clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Wentworth Resources Limited via Globenewswire
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