San Leon Boosts Transition from Exploration to Production
San Leon posted its operational results for the year ended December 31, 2009.
- Acquisition of Island Oil & Gas Plc - world class assets on the Atlantic Margin and Celtic Sea
- Acquisition of Gold Point Energy - greatly enhanced our portfolio and provided access to high potential shale gas concessions in Poland's Baltic basin
- Farm out agreement and JV with Talisman Energy across the Company's Baltic Basin concessions to drill three and up to six wells to prove the shale gas play.
- Ongoing relationship with PGS who will provide up to a $50MM facility for seismic services.
- Management team strengthened through addition of Shaun Hennessey, non executive director and John Buggenhagen, Vice President Exploration
Oisin Fanning, Chairman of San Leon Energy, commented, "San Leon has used its stock market listing and taken advantage of the prevailing industry conditions to make strategic acquisitions. These acquisitions have enabled us to build a diverse portfolio of assets with exceptional potential. The development of this portfolio has been driven with the objective of delivering value; aggressively moving from exploration into production. We are on track to achieve this; minimizing the risk to our shareholders and encouraging long term inward investment to enhance the investment proposition."
Exploration Licence Areas: Poland
Given the ever increasing need for energy to fuel its growing economy, Poland is regarded as an attractive place for petroleum exploration.
Some two-thirds of its energy is imported from Russia and to avoid such dependence, the Polish Government is actively encouraging foreign investment to tap the potential that exists in various parts of the country.
San Leon is accepted as a significant player in the Polish market, with interests in six license areas and the potential for substantial revenue generation through the joint venture farm-out agreement with Talisman Energy.
The acquisition of Gold Point Energy (GPE) in 2009 adds valuable shale gas concessions in the Baltic Basin to the SLE portfolio and it is estimated that they have the potential to change the face of gas supply in the future.
The joint venture farm-out agreement with Talisman Energy in Poland is recognized by industry analysts as a particularly astute business move.
Talisman is viewed as the leading international shale gas player and has made a significant investment and is committed to drilling a minimum of three wells and up to six wells on the three San Leon concession to prove the shale gas play on our three licenses in the Baltic Basin covering some 600,000 acres. San Leon receives a 40% free carry with this arrangement which is effectively an inward investment in the company.
Under the terms of the deal, Talisman will:
- Pay SLE €1.5M cash
- (with PGS) pay 100% initial 2D seismic program (over 450km)
- Drill one well per concession to earn 30% interest
- Drill at least one 1,000m horizontal with two optional 500m horizontals proposed
- Have the option to earn an additional 30% interest, with an additional well option per block
The Baltic Basin licenses comprise 600,000 acres where SLE holds 100% of three concessions including Gdansk-W, Braniewo-S, Szczawno - with a pending application on the Czersk concession.
The work program in the Baltic Basin includes 450 km of 2D seismic and three wells (up to 4500m) with a 1000 meter horizontal section on the Braniewo-S concession to be drilled over next two years. The initial drilling is expected Q2/Q3 2011.
Additionally, three optional wells with horizontal sections will be drilled on concessions after successful first phase of testing.
Initial technical evaluation of the shale gas potential in the Baltic Basin shows the play to have estimated reserves of 4 to 6 TCF of recoverable natural gas across San Leon's acreage. This represents a low risk scenario with excellent commercial gas potential.
Permian Basin South
SLE is currently engaged in a 5 year exploration and development program on its two concessions, Nowa Sol and Wschowa. Both concessions are on trend with prolific Rotliegendes gas and Zechstein oil production. Nowa Sol contains four potentially under developed oil fields which SLE is currently evaluating for potential 3D seismic acquisition in 2010. It is believed that up to 500,000 BBLS of remaining oil can be recovered from these shallow known fields.
Some 3,000 km of 2D seismic and data from 90 wells are being evaluated.
SLE's current technical evaluation also indicates that a significant unconventional gas play exists in the relatively untested Carboniferous section.
Permian Basin North
SLE's Szczecinek interests in the northern Permian Basin is also on trend with Zechstein oil production. SLE has a 50% interest in the 980 km2 concession with its operating partner Gas Plus (50%).
The work program for the concession includes the acquisition of 60km2 3D seismic survey in Q3 2010 with drilling of the Sylvia prospect planned for 2011. Estimated reserves for Sylvia are 11.3 MMBOE.
The existing, unproduced Czarne gas field with estimated reserves of 12.4 BCFE adds additional upside to any development in this area.
The long-term revenue-earning potential of San Leon's Moroccan portfolio (covering 13.4 million acres) was further enhanced during the year with the acquisition of Island Oil & Gas (IOG), a deal which gives the Company increased interests in the Tarfaya and Zag license areas and two new offshore licenses - Foum Draa and Sidi Moussa.
In addition to the two oil and gas exploration projects in the two major basins, San Leon also has a third, 6000m2 interest in the Tarfaya Oil Shale area, a project which is now well underway. The license, for a three year work program, was signed in May 2009.
Tarfaya Oil Shale Project
Following completion of the first technical study at the end of 2008, optimization and field analysis took place during 2009, with SLE's oil shale plant due to be operational by the end of 2010. Through careful ongoing procurement, the construction budget for the project will be less than half the estimated $4.6M.
Research indicates over 50 billion barrels recoverable (based on 62 liters per tonne) from this source and San Leon will implement an in-situ process for heat transfer to the shale pad at depth, and surface recovery of liberated kerogens and hydrocarbons.
Zag and Tarfaya Licenses
The Zag and Tarfaya Basin licenses, both 8-year licenses, were signed in 2009 and 2008 respectively and the prospects are particularly encouraging, not least because Morocco offers excellent fiscal terms and SLE has established strong working relationships with the relevant authorities there.
The Zag Basin license represents a 5.4 million acres (21,807m2) area which has seen large gas discoveries to the east and south of the license, with other major players already active in the area. It is part of a larger basin which contains 43% of the known oil and 84% of the known gas reserves of the entire North African region (some 460Bboe recoverable). Planned export pipelines to the European markets have renewed interest in the previously unexplored Zag-Tindouf Basin.
The work program in Zag will include the acquisition of 500km2 seismic in the second half of 2010 and drilling a well by 2011. Estimated resources in the license area are 10+ TCF and 500+ MMBO.
In the Tarfaya Basin, SLE plans to add 500km2 of 2D seismic to the seismic it already has in its database by the end of 2010, with the intention of drilling the following year. Discoveries in the Cap Juby offshore field and south of the SLE license represent further encouragement while an NSAI report indicates up to 13.7 billion barrels OIP from 12 leads/prospects.
Foum Draa & Sidi Moussa
SLE's acquisition of Island Oil & Gas (IOG) included two contiguous offshore licenses - Foum Draa and Sidi Moussa - amounting to 13,000km2 sited in water depths between 100 and 2,000 meters.
3-D seismic had been shot over 3,800km2 in Foum Draa and a further 1,460km2 on Sidi Moussa, a total of 5260km2 3-D seismic valued at today's prices at $50m. These licenses have exciting short-term potential with each estimated to yield half a billion barrels.
SLE has successfully acquired all five permits it applied for in Italy. Despite two of the permits being top-filed, the Italian Ministry ruled in favor of San Leon Energy SRL in January 2009. The Group was the subject of CIRM due diligence of its technical and financial strength and was successful in a competitive tender process against two established US companies.
The permits include three offshore licenses near Sicily and two onshore licenses in the Po Valley. The applications are published on the Italian BUIG.
Sicily - offshore permits
San Leon has three exclusive offshore permit applications off the coast of Sicily covering 1,821 km2 in total (100% held by San Leon).
The Narciso Oil Field off the west coast Sicily was first discovered by AGIP in 1985. Initial tests flow-tested over 3,000 BOPD with a long term test which produced over 800,000 barrels in less than a year. AGIP gained Ministry approval in 1986 to produce oil from Narciso but with the collapse of oil to $10 a barrel at the time, it was no longer economic to develop the field and AGIP abandoned the site in the '90s.
A recent evaluation of the field by Fugro Robertson on San Leon's behalf reported mean reserves of 7.0 MMBO.
The Sicilian permits include:
- D352 CR-SL, an area comprising 358.5 km2, located west of Sicily in the Canal Zone C, below the Egadi Islands;
- D353 CR-SL, an area comprising 226.2 km2, located southwest of Sicily in the Canal Zone C;
- D354 CR-SL, an area comprising 482.5 km2, located southwest of Sicily and near the coast in the Canal Zone C;
Several exploration prospects, identified on 2D seismic, are on trend with existing fields including Narciso, Norma, Naila, and Nilde. Nine seismic campaigns were executed during the three exploration periods of the original ENI permit. The D353 CR-SL permit resides to the southwest of the Narciso permit and just east of the Norma, Naila, and Nilde oil fields.
SLE plans to acquire at least 20km2 3D seismic over the Narciso Field and drill an appraisal as part of the ongoing work program.
The Louisiana oil disaster in the USA has undoubtedly created difficulties for the 22 operators working offshore Italy and the Italian Government is understandably concerned with protecting its environment and demanding appropriate safeguards.
The impact to all operators may be increased costs and a longer compliance process to get offshore drilling started in the foreseeable future, even though SLE's licenses in Europe and North Africa technically do not pose the environmental risks witnessed this year.
Po Valley - onshore licenses
The Po Valley (Pianura Padana) is the main industrial area of Italy and is a mature gas-producing basin with an excellent infrastructure, contributing to Italy's position as the fifth largest gas producer in Europe.
The Po Valley permits are the Sorbola and Sospiro, representing a total area of 753 km2:
- Sorbolo (302 km2) is located in the Emilia Romagna Region in the Parma-Reggio Province.
- Sospiro (451 km2) is located in the Lombardia Region in the Brescia-Cremona-Mantova Province.
The Sorbolo permit is adjacent to a number of gas discoveries and producing fields - for example, the Palazetto gas field, drilled by Agip (ENI) in 1982, lies south of the permit and the now depleted Correggio gas field is to the east.
San Leon believes that both permits have strong exploration potential.
SLE began a 5-year work program during 2009 and plans at least 200 km of 2D seismic and to drill at least one well.
As a result of its acquisition of Island Oil & Gas, San Leon has now added 9 offshore Ireland assets, comprising five operated licenses on the Atlantic Margin and four Celtic Sea assets, to its expanding portfolio.
The Celtic Sea assets involve two operated licenses, one non-operated petroleum lease and one license option. They include the Seven Heads gas-producing fields and the Old Head of Kinsale (OHK) and Schull gas field development projects.
The assets are located close to the SW Kinsale gas storage facility, the biggest Irish gas storage project, which utilizes the nearby Kinsale field for gas injection and production facilities. The existing infrastructure nearby suggests the development of OHK and Schull as gas storage facilities is a very real possibility.
SLE's acquired West of Ireland interests are located in a variety of geological basins on the Atlantic Margin and they represent significant opportunities for gas and oil prospects. Indeed, SLE's in-depth evaluation has revealed that the potential of the five Atlantic Margin licenses is on a par with what was discovered in the North Sea back in the 1980s.
One license alone has proven reserves of 150m barrels while the Porcupine C1 prospect is particularly exciting in that it has the potential for over one billion barrels in place.
SLE plans to conduct a seismic program with PGS after which it intends to identify farm-in partners to exploit the enormous potential and so minimize risk to our shareholders. At least two major international players are due to drill there during 2010, a clear indication of the area's viability.
- San Leon 'Encouraged' by Performance from its OML 18 Field in Nigeria (Dec 30)
- San Leon Energy Sees Renewed Takeover Interest (Dec 19)
- San Leon Sells 2 Polish Onshore Assets (Nov 18)