Cooper-RWE Dea JV Secures Stake in Poland

Cooper Energy has secured an interest in an attractive oil and gas exploration and appraisal portfolio in Poland through a Joint Venture agreement with RWE Dea Germany, a subsidiary of RWE.

COE's share of the Joint Venture consists of a 40% working interest in six contiguous exploration concessions owned by RWE Dea in the prolific Polish Carpathian fold belt.

RWE Dea will retain a 60% interest in the Joint Venture and will be nominated as the Operator.

The MUAs cover a total area of 3,311 square kilometers and are situated in an established and proven petroleum province that contains numerous proven hydrocarbon play types with shallow oil fields in sandstone reservoirs of the Carpathian thrust-fold belt and additional large deep gas exploration leads in the underlying sub-thrust of the Carpathian Foredeep.

In addition to the exploration potential, the MUAs also contain the Pola Oil Field, which was discovered by RWE Dea with their Pola-1 exploration well in 2007.

Pola-1 discovered oil in the Ciezkowice and Krosno sandstone reservoirs. The discovery was further appraised in 2009 by the Pola-2 and Pola-3 appraisal wells, which also discovered oil in the Ciezkowice and Krosno sandstone reservoirs and these wells were cased and suspended for further evaluation. The Ciezkowice and Krosno reservoirs are characterized as low permeability sandstones and it is expected that modern completion techniques, such as hydraulic fracturing, may significantly improve well production rates.

Due diligence by COE has confirmed that the Pola Contingent Resource of 7.8 million barrels (P50, 100% JV) is reasonable considering the current uncertainties associated with the field. Other oil fields in the area have produced 1-7 million barrels of oil, which provide a sense-check on the estimated volumes for Pola.

To determine if the Pola Oil Field can produce at commercial production rates, it is planned to immediately execute a production well test on Pola-3 and a hydraulic fracture production well test on the Pola-2 well.

Following the production well tests, a field development plan (FDP) will be prepared by RWE Dea. The FDP will update the estimates of the recoverable oil volumes and cost to develop the oil field.

Following the FDP a final investment decision (FID) will be made by RWE Dea regarding the development of the oil field.

To further mature the shallow oil potential, RWE Dea has recently completed the acquisition of a 115 km2 3D seismic survey, which is adjacent to the Pola discovery. This data is currently being processed.

In addition to the shallower oil potential, RWE Dea has identified a deep sub-thrust gas lead at approximately 4,200 to 5,000 metres that COE believes has a Prospective Resource of 103 billion cubic feet (P50).

RWE Dea and COE will acquire further seismic over the next few years in order to mature additional shallow oil potential and other leads in the deep gas play.

Oil and gas infrastructure is very well established in the area, including gas pipelines and two oil refineries. Oil is usually transported to the refineries by truck.

To progress COE's participation in the Joint Venture, RWE Dea and COE have concluded an agreement along the following lines:
The amount of the entire deal to enter the opportunity is €7.1 million (~A$10 million).

  • COE will pay RWE Dea part of this amount to secure 40% of the three MUAs excluding the Pola Oil Field. This entry cost gives COE immediate participation in the exploration activities.
  • COE will pay RWE Dea the remaining part of the abovementioned amount to immediately test the Pola-2 and Pola-3 wells. This cost includes the purchase of an option to participate in the development of the Pola Oil Field.
    • The option gives COE an option to participate in the development of the Pola Oil Field after FDP and FID for a cost of €10 million (~A$14 MM) plus the ongoing 40% working interest share of the development costs.
    • The decision to participate or not to participate in the development of the Pola Oil Field does not affect COE's participation in the exploration outside of the Pola Oil Field.
  • The Joint Venture between RWE Dea and COE will be governed by an international standard Joint Operating Agreement (JOA), which is currently in preparation.
  • A Transfer request for 40% interest in the MUAs 2 and 3 will be made to the Polish authorities immediately. Transfer of MUA 1, containing the Pola discovery, can only be granted after a decision has been made regarding the development or non-development of the Pola Oil Field.
  • Transfer of the 40% interest in the MUAs to Cooper Energy is dependent upon Polish authority approval. In the interim, the Joint Venture will proceed as a purely contractual relationship between COE and RWE Dea.

The immediate cost of COE's participation in the MUAs is €7.1 million plus €1.3 million for the 2010 exploration budget (total €8.4 million, ~A$ 12 million).

Future costs to progress the exploration and potential development activities will be proposed by the Operator under normal Joint Venture procedures.

The interests in the Joint Venture will be held by COE's wholly owned polish subsidiary which is in the process of changing its name to CE Polska Sp. z.o.o. The forecast expenditures are expected to be funded out of COE's existing cash reserves.

Michael Scott, Managing Director, noted, "This agreement with RWE Dea gives Cooper Energy a new country entry into Poland with a portfolio that consists of six exploration blocks and a discovered oil field. The assets provide immediate leverage to growth with the testing of the discovered oil field and the maturation of multiple play types via seismic and interpretation activities, which we are hoping will lead to significant recoverable oil additions to our portfolio over the coming years. This opportunity significantly increases Cooper Energy's Eastern Europe portfolio and the Company is looking forward to adding further projects in the region. In addition, we are very pleased to be entering into a Joint Venture with RWE Dea which is a subsidiary of one of Europe’s largest energy companies and has many years of experience in Poland as a proven and safe operator."