TIDMTOM
RNS Number : 6385J
TomCo Energy PLC
17 August 2023
17 August 2023
TOMCO ENERGY PLC
("TomCo" or the "Company")
TSHII Update and
Updated Independent Reserves Report for the TSHII Site
TomCo Energy plc (AIM: TOM), the US operating oil development
group focused on using innovative technology to unlock
unconventional hydrocarbon resources, is pleased to provide an
update with respect to the Company's 100% owned subsidiary,
Greenfield Energy LLC's ("Greenfield"), potential acquisition of
the remaining ownership and membership rights and interests in Tar
Sands Holdings II LLC ("TSHII") (the "Membership Interests"), and
the findings of an updated independent reserves report for the
TSHII site (the "Updated Report"). The Updated Report was
commissioned from Netherland, Sewell & Associates, Inc.
("NSAI") estimating the oil reserves, associated marketable sand
volumes, and future net revenue, as of 30 June 2023, in respect of
a potential commercial scale project on the mining properties
comprising the TSHII site .
As previously announced, Greenfield owns a 10% Membership
Interest in TSHII and holds an exclusive option, exercisable at its
sole discretion, to acquire the remaining 90% of the Membership
Interests for additional cash consideration of US$17.25 million on
or before 31 December 2023 (the "Option"), together with a matching
right, as set out in the Company's announcement of 6 June 2023.
TSHII Update
The Company remains in discussions to secure a potential funding
package for Greenfield, that would, inter alia, enable Greenfield
to ultimately exercise the Option and pursue its previously
announced wider development plans. In this regard, the principal
route under active consideration remains TomCo potentially
disposing of a majority stake in Greenfield to a partner(s) in
return for, inter alia, certain upfront cash consideration, a
continuing minority equity participation for TomCo in Greenfield
(without the requirement for further capital contributions from
TomCo) and the provision of a sizeable funding package to
Greenfield. As previously announced, any such proposed transaction
would likely constitute a fundamental disposal for TomCo pursuant
to the provisions of Rule 15 of the AIM Rules for Companies and
therefore be subject, inter alia, to the approval of TomCo's
shareholders at a duly convened general meeting. In such
eventuality, it would fall to the new majority owner(s) of
Greenfield to decide whether or not to exercise the Option post
completion of such proposed disposal.
Alongside these discussions, the Company continues to explore
potential alternative funding routes for Greenfield including
reserves based lending which will be facilitated by the Updated
Report.
There can be no certainty that any funding proposal will
ultimately be successfully concluded or as to the precise terms or
structure of any such funding transaction or alternative financing
arrangements for Greenfield. Further announcements will be made in
due course as appropriate.
Updated Independent Reserves Report for the TSHII Site
The Updated Report commissioned from NSAI estimating the oil
reserves, associated marketable sand volumes, and future net
revenue, as of 30 June 2023, updates the findings from NSAI's
previous report, as announced by the Company on 13 January 2022
(the "NSAI January 2022 Report").
Updated Report Highlights
-- NSAI have estimated the proved ("1P"), proved plus probable
("2P"), and proved plus probable plus possible ("3P") oil reserves,
associated marketable sand volumes, and future net revenue, as at
30 June 2023, in respect of a 100 per cent. interest in a potential
commercial scale project on the mining properties comprising the
TSHII site
-- As anticipated, NSAI's estimates of oil reserves and volumes
of marketable sand are unchanged from the NSAI January 2022 Report,
as follows:
o NSAI estimate 1P oil reserves of 22.8 million barrels of oil
("bbls"), 2P oil reserves of 33.6 million bbls and 3P oil reserves
of 44.3 million bbls
o NSAI further estimate associated volumes of marketable sand at
22.8 million tonnes (1P), 41.2 million tonnes (2P) and 59.8 million
tonnes (3P)
-- Total estimated undiscounted future net revenues (as
described further below), in respect of a gross 100% interest in
TSHII, have increased from the NSAI January 2022 Report and range
from US$1.32 billion based on 1P reserves (NSAI January 2022
Report: US$942 million) to approximately US$3.2 billion based on 3P
reserves (NSAI January 2022 Report: US$2.5 billion)
-- Estimated discounted future net revenues (as described
further below) attributable to TomCo's current 10 per cent.
interest in TSHII range from approximately US$47.3 million based on
1P reserves (NSAI January 2022 Report: US$30.5 million) to
approximately US$77.6 million based on 3P reserves (NSAI January
2022 Report: US$57.6 million)
-- The increase in estimated undiscounted and discounted future
net revenues principally reflects increased estimated future
product prices for asphalt, heavy oil and diesel, particularly the
assumed asphalt price which has risen by approximately 25 per cent.
to US$117.39/bbl (NSAI January 2022: US$93.64/bbl)
Updated Report Details
NSAI have estimated the proved (1P), proved plus probable (2P),
and proved plus probable plus possible (3P) oil reserves,
associated marketable sand volumes, and future net revenue, as of
30 June 2023, in respect of a 100 per cent. interest in a
commercial scale project situated on the mining properties
comprising the TSHII site in the Uinta Basin, Utah, United
States.
The Updated Report was prepared using certain price and cost
parameters and development plans specified by TomCo. The reserves
estimates in the Updated Report were prepared in accordance with
the definitions and guidelines set out in the 2018 Petroleum
Resources Management System ("PRMS") approved by the Society of
Petroleum Engineers ("SPE"). Although marketable sand volumes are
not hydrocarbons, NSAI used the 2018 PRMS as the framework for the
categorisation of such volumes and their associated revenues.
In 2021, Greenfield operated Petroteq Energy Inc's existing oil
sands pilot plant at Asphalt Ridge, Utah for a trial period in
order to demonstrate the feasibility of mining shallow tar sands
using conventional open pits and applying solvents to extract,
process and sell heavy oil. Having demonstrated pilot viability,
Greenfield has begun to negotiate future marketing contracts for
refining and marketing asphalt, heavy oil and diesel. The planned
mining operations and extraction processes at TSHII produce various
types of sand as byproducts, and Greenfield has identified markets
for industrial, construction, fracture stimulation ("frac") and
silica sands.
NSAI estimate the net oil reserves, associated marketable sand
volumes, and future net revenue in respect of the gross (100 per
cent.) interest in the TSHII properties, as of 30 June 2023, in
accordance with PRMS to be:
Net Volumes(1) Future Net Revenue
(US$ thousands)
------------ --------------
Oil Reserves Marketable Present
Sand(2) Worth
Category (Thousand (Thousand Total (US$ thousands)
bbls) tonnes) at 10% discount
rate
Proved (1P) 22,848.3 22,791.2 1,318,899.3 473,141.7
Proved + Probable (2P) 33,636.3 41,221.3 2,262,308.3 663,912.4
Proved + Probable +
Possible (3P) 44,322.3 59,790.8 3,212,661.1 775,510.5
Notes:
(1) There is no expected gas production in respect of the
project.
(2) Net marketable sand volumes are stated after a 5 per cent.
deduction for fines and losses.
Accordingly, the net oil reserves, associated marketable sand
volumes and future net revenue attributable to TomCo's current 10
per cent. interest in the TSHII properties is as follows:
Net Volumes Future Net Revenue
(US$ thousands)
------------ -----------
Oil Reserves Marketable Present
Sand Worth
Category (Thousand (Thousand Total (US$ thousands)
bbls) tonnes) at 10% discount
rate
Proved (1P) 2,284.83 2,279.12 131,889.93 47,314.17
Proved + Probable (2P) 3,363.63 4,122.13 226,230.83 66,391.24
Proved + Probable +
Possible (3P) 4,432.23 5,979.08 321,266.11 77,551.05
In accordance with the 2018 PRMS definitions and guidelines, one
of the primary requirements for oil and gas volumes to be
classified as reserves is that they be commercially recoverable.
For the purposes of its Updated Report, NSAI evaluated a
sensitivity to the project wherein costs are incurred to dispose of
100 per cent. of the mined sand volumes rather than including
revenue from selling 95 per cent. of it. In this sensitivity, based
on the oil prices and costs assumed (as described further below),
the project is still commercial at the 1P, 2P and 3P levels.
Reserves categorisation conveys the relative degree of
certainty; reserves subcategorisation is based on development and
production status. The 1P volumes are inclusive of proved
undeveloped volumes only. The Updated Report indicates that as of
30 June 2023, there are no developed oil reserves or associated
marketable sand volumes for the TSHII site. For the purposes of the
Updated Report, the volumes and parameters associated with the
proved, proved plus probable, and proved plus probable plus
possible estimate scenarios of reserves are referred to as 1P, 2P
and 3P, respectively. The estimates of oil reserves, associated
marketable sand volumes, and future net revenue included therein
have not been adjusted for risk. The Updated Report does not
include any value that could be attributed to interests in
undeveloped acreage beyond those tracts for which undeveloped oil
reserves and associated marketable sand volumes have been
estimated.
Gross revenue in the Updated Report is the gross (100 per cent.)
revenue from the properties prior to any deductions whereas future
net revenue is after deductions of production taxes, capital costs,
abandonment costs and operating expenses, but before consideration
of any income taxes. The future net revenue has then been
discounted at an annual rate of 10 per cent. to determine its
present worth.
The Updated Report was prepared using oil and marketable sand
price parameters specified by TomCo. The future oil produced and
processed through mining operations yields three distinct products
namely asphalt, heavy oil and diesel. The asphalt price is based on
the first quarter 2023 Argus Asphalt Index average price of
US$117.39. Heavy oil and diesel prices are based on the 1 June 2023
West Texas Intermediate posted price of US$66.58 and are adjusted
for quality and market differentials. Sand produced through mining
operations is processed and sold as four distinct products
(industrial, construction, frac and silica sands). Industrial, frac
and silica sand prices are based on the 2021 United States
Geological Survey ("USGS") prices for each product; construction
sand prices are based on the January 2023 USGS price.
Operating costs used in the Updated Report are based on the
projected costs of upscaling pilot mining operations provided by
TomCo. These costs include TomCo's estimates of its administrative
costs. Capital costs used in the Updated Report were also provided
by TomCo and are based on the projected costs of upscaling pilot
mining operations. Capital costs were included for the planned
construction of a processing plant, production facilities and
equipment. Based on its understanding of Greenfield's future
development plans and review of the information provided by TomCo,
NSAI regarded the estimated capital costs to be reasonable.
Abandonment costs used in the Updated Report are TomCo's estimates
of the costs to abandon the future production facilities, net of
any salvage value. None of the costs were escalated for
inflation.
A copy of NSAI's full updated report will shortly be made
available on the Company's website.
Commenting, John Potter, CEO of TomCo, said : " Greenfield
continues to progress its previously announced funding discussions,
as well as exploring the potential for reserves based lending which
will be facilitated by the Updated Report. The findings of NSAI's
latest report serve to further confirm our view that the TSHII site
contains substantial economic resources, both in terms of oil and
marketable sand. These estimated economic resources have
significantly increased in value over the last 18 months and we
remain fully focussed on securing the requisite funding for their
future exploitation. Whilst there can be no certainty that the
required funding can be secured, we remain optimistic that we can
ultimately secure one of the routes under consideration. We look
forward to providing further updates in due course."
Enquiries :
TomCo Energy plc
Malcolm Groat (Chairman) / John Potter (CEO) +44 (0)20 3823 3635
Strand Hanson Limited (Nominated Adviser)
James Harris / Matthew Chandler +44 (0)20 7409 3494
Novum Securities Limited (Broker)
Jon Belliss / Colin Rowbury +44 (0)20 7399 9402
IFC Advisory Limited (Financial PR)
Tim Metcalfe / Florence Chandler +44 (0)20 3934 6630
For further information, please visit www.tomcoenergy.com .
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as it forms part of
United Kingdom domestic law by virtue of the European Union
(Withdrawal) Act 2018, as amended by virtue of the Market Abuse
(Amendment) (EU Exit) Regulations 2019.
Competent Persons' Statement
The information contained in this announcement that relates to
Reserves in the Duchesne River and Rimrock Sandstones in certain
mining properties located in the Uinta Basin, Utah, United States
is based on information compiled by Mr. Benjamin W. Johnson
(Petroleum Engineer) and Mr. John G. Hattner (Petroleum Geologist),
both employees of Netherland, Sewell & Associates, Inc. Mr.
Johnson and Mr. Hattner are both Qualified Petroleum Reserves and
Resources Evaluators and are both members of the Society of
Petroleum Engineers such that they are suitably qualified as
Competent Persons as set out in the June 2009 AIM Note for Mining
and Oil & Gas Companies. Mr. Hattner is also a member of the
American Association of Petroleum Geologists. Mr. Johnson and Mr.
Hattner have reviewed and have consented to the inclusion of such
information in this announcement in the form and context in which
it appears.
Glossary of Technical Terms
1P Proved Reserves
2P Proved Reserves plus Probable
Reserves
----------------------------------------
3P Proved Reserves plus Probable
Reserves plus Possible Reserves
----------------------------------------
Bbls barrels of oil
----------------------------------------
Probable Reserves Those additional Reserves that
analysis of geoscience and engineering
data indicates are less likely
to be recovered than Proved
Reserves but more certain to
be recovered than Possible Reserves
----------------------------------------
Proved Reserves Those quantities of petroleum
that, 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
----------------------------------------
Possible Reserves Those additional reserves that
analysis of geoscience and engineering
data indicates are less likely
to be recoverable than Probable
Reserves
----------------------------------------
Reserves Reserves are those quantities
of petroleum anticipated to
be commercially recoverable
by application of development
projects to known accumulations
from a given date forward under
defined conditions
----------------------------------------
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