Rose Petroleum plc

Publication of Reserve Report

23-May-2014

Publication of Reserve Report

Rose Petroleum plc (AIM Ticker: ROSE) is pleased to announce the results of its recent reserve report prepared by Ryder Scott Company (“Ryder Scott”) on Rose’s Mancos and Paradox Oil and Gas Projects, Utah, USA (the “Project”). The Company, through its wholly owned subsidiary Rose Petroleum (Utah) LLC (“Rose Utah”) holds a 75% working interest (59.25% net revenue interest) in certain oil, gas and hydrocarbon leases in Grand and Emery Counties, Utah covering 230,000 acres (the “Leases”), further details of which appear in the Company’s announcement of 17 March 2014.

The full Ryder Scott report and maps are available on the Company website: www.rosepetroleum.com.

HIGHLIGHTS

Unrisked Prospective (Recoverable) Hydrocarbon Resources on a Best Case (P50 equivalent) basis:

  • collective total Mancos Shale and Paradox Formation combined:
    • 1,452.86 MMBO (million barrels of oil) (1.45 Billion barrels of oil)
    • 4,791.85 BCFG (billion cubic feet gas) (4.79 trillion Cubic Feet of gas)
  • collective total Best Case (P50 equivalent) in the Paradox formation:
    • 966.37 MMBO (966 Million barrels of oil)
    • 1,888.46 BCFG (1.88 trillion cubic feet of gas)
  • collective total Best Case (P50 equivalent) in the Mancos Shale:
    • 486.49 MMBO (486 million barrels of oil)
    • 2,903.39 BCFG (2.90 trillion cubic feet of gas)

Matthew Idiens, CEO, said: “We are pleased to be able to release these independent numbers from Ryder Scott from which it is clear that the Project offers significant production potential. The resource is presently categorised as Prospective Resources which, as stated by the report, is based on the current lack of drilling directly on Rose’s Leases. However, given that multiple wells in the surrounding area to Rose’s Leases have produced oil and gas to surface from various Paradox Clastics, as have several shallow unstimulated vertical open hole wells in the Mancos shale, we believe that the Project is extremely exciting and has the potential to dramatically change the outlook for Rose.”

John Blair (BSc Geology and MSc Geophysics), Head of New Ventures for Rose Petroleum plc, who meets the criteria of a qualified person under the AIM Rules - Note for Mining and Oil & Gas Companies, has reviewed and approved the technical information contained within this announcement.

Table 1: Estimated 100% Gross Volumes Unrisked Undiscovered Original Hydrocarbon in Place (OOIP & OGIP) Volumes in the Mancos Shale and Paradox Formation:

Prospect/ Formation
OOIP - MMBO
OGIP – BCF
P90
P50
P10
P90
P50
P10
Mancos Shale
Collective Total
14,545
17,309
20,383
81,059
103,265
129,231
Paradox Formation
Collective Total
15,876
19,139
23,008
26,005
32,999
41,300
Total
30,421
36,448
43,391
107,064
136,264
170,531

Table 2: Estimated 100% Gross Volumes Unrisked Prospective (Recoverable) Hydrocarbon Resources (Estimated Ultimate Recoverable Reserves -EUR) in the Mancos Shale and Paradox Formation:

Prospect / Formation
EUR Oil/Condensate - MMBO
EUR Gas – BCF
 
Low
Best
High
MEAN
Low
Best
High
MEAN
Mancos
Totals
168.20
486.49
1,376.11
666.11
995.13
2,903.39
8,272.99
3,998.72
Paradox Totals
452.27
966.37
1,994.50
1,115.29
874.43
1,888.46
3,913.55
2,187.46

Paradox Formation

The Paradox source rocks and reservoir rocks are trapped vertically and laterally by thick salt intervals. This has restricted the ability for the generated oil to migrate out of the salt enclosed clastic cycles and thus has set-up a regional resource play.

The Paradox is roughly 3,000 feet thick across the Rose leasehold at depth of 6,500 to 10,000 feet.

The collective low case prospective recoverable resource potential that Ryder Scott has determined for the Paradox formation on Rose’s Leases is 450 MMBO and 875 BCF from the collective 15 perspective reservoirs that they identified (see Table 2). This is not to say that every prospective reservoir is necessarily going to be economic to develop. Thus, Ryder Scott has placed a chance of success (COS) risk factor on each prospective reservoir, which vary across each individual reservoir from 21% COS to as high as a 56% COS.

Fidelity Exploration and Production (“Fidelity”) (a wholly owned subsidiary of MDU Resources Group – NYSE: MDU) is developing the Paradox immediately south of Rose’s Paradox acreage. Since 2012, Fidelity has regularly achieved IP initial rates of production of 1,000 BOPD (barrels of oil per day) per well and has produced over 5.2 MMBO and 4.2 BCF from 20 wells. They are currently producing over 4,500 BOPD from the Paradox. Fidelity has reported individual well reserves of recent horizontal wells are as high 1.5 MMBO per well.

The Paradox formation consists of a series of clastic cycles of which the above production figures are primarily only from the lowest most interval of the Paradox, known as the Cane Creek. However, Fidelity has established 10 additional clastic cycles within the Paradox that it believes to be productive and are just now beginning to develop those as well. Fidelity has released reserve estimates of 150 to 440 MBO per interval per well for each of these additional 10 zones. Fidelity has a capital budget for the Paradox of $170m for 2014.

Mancos Shale

The Mancos is stratigraphically equivalent to the Niobrara in NW Colorado and the Eagle Ford in South Texas. The Mancos / Niobrara has a long history of production in the region having produced over 300 MMBO and 5 TCFG (trillion cubic feet of gas).

The Mancos shale was divided into eleven prospects with each prospect having five separate potential “pay” intervals based on existing well control and surrounding production. The collective low case prospective recoverable resource potential that Ryder Scott has determined for the Mancos on Rose’s Leases is 168 MMBO and 995 BCF. Similarly to the Paradox, Ryder Scott has cautioned that not every interval is necessarily going to be economic to develop. Therefore, Ryder Scott has placed a COS risk factor on each of the five Mancos intervals. As the Mancos is much more homogeneous than the Paradox, the COS that Ryder Scott developed for the Mancos is the same for each of the five intervals. Ryder Scott’s COS for all the Mancos is 30%. The full table is set out below.

Notes:

Ryder Scott, at the request of Rose, has conducted a resource potential analysis on Rose’s Leases for the Mancos and the Paradox formations. Ryder Scott’s report has been prepared using the standards and definitions of the SPE-PRMS published by the Society of Petroleum Engineers, the American Association of Petroleum Geologists, the World Petroleum Council and the Society of Petroleum Evaluation Engineers in 2007.

In PRMS Prospective Resources are defined as: “Those quantities of petroleum, which are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations.” Prospective Resources can become Contingent Resources once a well is drilled and a discovery is made on the leasehold being evaluated. The last part of the proceeding sentence is the reason that Rose’s reserves classification has to be categorised as Prospective versus Contingent. Even though there are producing wells adjacent to the Leases, there are currently no producing wells actually on the Leases.

Ryder Scott also prepares Fidelity’s reserves and therefore partly relied on the knowledge of the Paradox it has acquired through access to all of Fidelity’s data, including petrophysical analysis in terms of pay determination and production forecasting based on its petrophysical models.

About Ryder Scott

Ryder Scott Petroleum Consultants evaluates oil and gas properties and independently certifies petroleum reserves quantities in the U.S. and internationally. Founded in 1937, Ryder Scott is one of the largest, oldest and most respected reservoir-evaluation consulting firms in the industry. The firm performs several hundred consulting studies a year for a variety of clients. The firm has earned worldwide recognition for reliably predicting the performance of complex oil and gas reservoirs in all major petroleum provinces. With 90 professional petroleum engineers and geoscientists, the firm conducts reserves evaluations, geoscience/geology studies, field development and enhanced oil recovery design, reservoir simulation, economic analysis, management consulting and expert witness testimony. The Houston-based firm has branch offices in Calgary and Denver. For the last 10 years, Ryder Scott has been the most widely used consulting firm for preparing annual petroleum reserves certifications for filers with the U.S. Securities and Exchange Commission, according to research firm John S. Herold. Ryder Scott also serves clients listed on the London, Toronto, Hong Kong, Australian and other stock exchanges.