Samson Oil & Gas Limited:
December 31st Reserves
Netherland,
Sewell & Associates, Inc. has completed its report estimating Samson’s
oil and gas reserves as of December 31, 2016:
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OIL MBBL
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GAS MMCF
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NPV10 M\M
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PDP
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3,052
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1,853
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$44.198
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PDNP
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245
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486
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$3.638
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PUD
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5,409
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3,787
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$55.329
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TOTAL PROVED
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8,707
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6,126
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$103.165
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These estimates utilize the NYMEX strip price, adjusted for delivery and
quality differentials.
The current estimate of US$103 million in proved reserves can be
compared to the June 30, 2016 estimate, adjusted to exclude the North
Stockyard field that was sold in November 2016:
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OIL MBBL
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GAS MMCF
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NPV10 MM
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PDP
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3,342
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2,286
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$47.242
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PDNP
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1,230
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2,252
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$16.196
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PUD
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5,400
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3,780
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$47.283
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TOTAL PROVED
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9,971
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8,318
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$110.720
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The decrease from June 30 to December 31 is due to production roll off
and the temporary shut in, for various mechanical reasons, of some
producing wells. Substantially all of the shut in wells have been
returned to production since December 31.
In addition, the proved developed non-producing (PNDP) category has been
reduced due to a decision not to reflect the results of potential
workovers (such as fresh water clean outs and acid jobs) until all work
has been completed.
The proved undeveloped (PUD) category has seen an increase because of
increased oil prices.
The estimate uses variables particular to each well, based on historical
data. For Samson’s recently acquired Foreman Butte project, which
constitutes the bulk of the reserves, the variables generally adhere to
the following parameters:
a) A PUD well cost at $2.8 million.
b) The PUD wells use a type
curve that generates an average EUR of 380,000 bbls.
c) A realized
oil price differential of $6.61 to WTI.
d) A fixed operating cost
of $3,400 per month per well.
e) A salt water disposal cost of
$1.50 per barrel
f) Negligible value attributed to gas sales.
Oil Price
The oil price used as December 31st
compared to that used in the June 30th estimate is as follows:
Period Ending
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June 30th Oil Price ($/Barrel)
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December 31st Oil Price ($/Barrel)
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December 2016
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49.42
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55.86
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December 2017
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52.17
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56.59
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December 2018
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53.69
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56.10
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December 2019
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54.60
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56.05
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Thereafter
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55.43
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56.21
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Differentials
Samson is seeing increased competition in the provision of oil marketing
services due to expected additional pipeline capacity in the Williston
Basin. The December 31st 2016 estimate utilizes the prior 12
months average, which is around $6.50 per barrel. We are currently
seeing contracts being offered that are closer to $5 a barrel, which may
be reflected in future estimates, positively affecting reserve value.
Production costs
The current estimate reflects an increase in our production costs based
on the actual field experience since taking over operatorship in May and
June of 2016. Management is concentrating its efforts on actively
reducing these costs, which are dominated by salt water disposal fees.
Management presently expects to reduce production costs in the near
future by achieving greater efficiencies in salt water disposal.
Pump efficiency
Samson has conducted a project wide fluid level study with the aim of
that study to determine whether the existing pump configuration is
maximizing the drawdown pressure on the reservoir. As a result of this
study Samson has selected 10 priority wells where adjustments will be
made to stroke length, stroke rate or pump diameter. It is expected that
an additional 350 BOPD of production would be realized from this
activity. If achieved, this would result in a higher PDP reserve value
in the future.
Infill Development Planning
In order to achieve a cost effective way of developing the proved
undeveloped acreage in the Foreman Butte Field, Samson has designed a
drilling method for its first Ratcliffe Formation PUD by drilling a new
deviated well bore from an existing zero value well. This operation is
expected to commence in the spring and will involve a work over rig
using slim hole directional drilling tools from the casing shoe of the
existing wellbore. It is expected to cost around $375,000 per lateral.
Current planning includes a second lateral, being drilled into the
underlying Nesson Formation which has proven productive in an offsetting
well. This operation will then be able to use existing surface
facilities. The total cost of both short laterals (5,000 feet) estimated
at $750,000 is competitive compared to a new well cost of around $2.8
million.
Recompletions
Well recompletions scheduled for this Spring to test behind-pipe pay
zones include the Davidson 1, the Karst 13-5, and USA Salsbury D-20
wells.
In the Davidson 1 well approximately 34’ of perforations will be added
to the Ratcliffe Formation after isolating the depleted Nesson interval
of the Mission Canyon Formation. A success in the Davidson 1 well
recompletion could potentially prove up a new oil field in the Ratcliffe
Formation.
In the Karst 13-5 well, perforations will be added in Ratcliffe interval
where 27’ of net pay has been identified through log analysis. This well
is currently shut-in and was a poor producer in the Nesson.
The USA Salsbury D-20 is currently a shut-in well that previously
produced from the Red River Formation. The well will test the uphole
behind-pipe pay in the Ratcliffe Formation where approximately 25’ of
net pay has been identified on the electric logs.
These operations continue Samson’s operational philosophy of bringing on
additional production in the most cost effective manner available.
Samson’s Ordinary Shares are traded on the Australian Securities
Exchange under the symbol "SSN". Samson's American Depository Shares
(ADSs) are traded on the New York Stock Exchange MKT under the symbol
"SSN". Each ADS represents 200 fully paid Ordinary Shares of Samson.
Samson has a total of 3,282 million ordinary shares issued and
outstanding (including 230 million options exercisable at AUD 3.8
cents), which would be the equivalent of 16.41 million ADSs.
Accordingly, based on the NYSE MKT closing price of US$0.57 per ADS on
February 15th, 2017, the Company has a current market
capitalization of approximately US$9.4 million (the options have been
valued at an exchange rate of 0.77). Correspondingly, based on the ASX
closing price of A$0.004 for ordinary shares and a closing price of
A$0.001 for the 2017 options, on February 15th, 2017, the
Company has a current market capitalization of approximately A$13.1
million.
Competent Person Statement
The reserves quoted in this announcement were estimated by Netherland
Sewell & Associates, an independent petroleum reserve engineering
consulting firm based on the definitions and disclosures guidelines
contained in the Society of Petroleum Engineers, World Petroleum
Council, Association of Petroleum Geologists and Society of Petroleum
Evaluation Engineers Petroleum Resources Management Systems.
Information in this announcement relating to hydrocarbon reserves is the
responsibility of the CEO of Samson Oil and Gas Ltd., Mr. T.M Barr a
petroleum geologist who holds an Associateship in Applied Geology and
who has 40 years of relevant experience in the oil and gas industry.
SAMSON OIL & GAS LIMITED
TERRY BARR
Managing Director
Statements made in this press release that are not historical facts may
be forward looking statements, including but not limited to statements
using words like “may”, “believe”, “expect”, “anticipate”, “should” or
“will.” Actual results may differ materially from those projected in any
forward-looking statement. There are a number of important factors that
could cause actual results to differ materially from those anticipated
or estimated by any forward looking information, including uncertainties
inherent in estimating the methods, timing and results of exploration
activities. A description of the risks and uncertainties that are
generally attendant to Samson and its industry, as well as other factors
that could affect Samson’s financial results, are included in the
prospectus and prospectus supplement for its recent Rights Offering as
well as the Company's report to the U.S. Securities and Exchange
Commission on Form 10-K, which are available at www.sec.gov/edgar/searchedgar/webusers.htm.
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