Welcome to Prospex

Prospex has acquired a 49.9% interest in the El Romeral gas power project, situated in southern Spain, through its Spanish affiliate, Tarba Energia SL (‘Tarba’), with partner Warrego Energy Ltd.

The El Romeral Licence Area (‘Area’) is an exciting new acquisition for the Company, with ongoing production from three wells; El Ciervo-1, Santa Clara-1 and Sevilla-3. Prospex and partner Warrego Energy Limited (‘Warrego’) acquired the three blocks with existing gas production, facilities and infrastructure at an initial consideration of €750,000, from current Operator Petroleum Oil and Gas España S.A. (‘Petroleum), a subsidiary of leading Spanish electricity company, Naturgy Energy Group S.A. (‘Naturgy’).

The asset has historically been explored by Chevron and Repsol among others. Centred on a robust set of well data, including over 500 km of 2D seismic lines with AVO analysis, historic exploration has led to seven geological gas discoveries with five of them commercial. The Area includes the El Romeral gas-to-power station, housing three Jenbacher gas engines, converting gas to electricity. The Area encompasses 25 km of local gas pipelines, connecting existing production to the power station, and the Maghreb-Europe gas pipeline operated by ENAGAS, the leading national gas distributor of Spain.

El Romeral Power Station & Production

The El Romeral Project has three producing wells; El Ciervo-1, Santa Clara-1 and Sevilla-3, with gross 2P reserves of 0.30 Bcf. The produced gas is supplied to the 100% project-owned 8.1 MW El Romeral power station, where a low maintenance cost contract is in place with General Electric. The power station has 78% spare capacity and provides both immediate revenues and also a low-cost route to commercialisation for future gas discoveries. The El Romeral power station was constructed in 2001 at an approximate cost of €10MM and current production is supplied to the station by a local 100% Project-owned gas pipeline. Yearly revenues from selling gas to the Spanish electricity grid are >€4.2MM, based on long terms average revenues per MWh. The Company has increased the utilisation of the power station and future revenues from production.

Prospectivity of the Blocks

The El Romeral Licence Area contains excellent prospectivity and multiple development opportunities. In particular, 11 very low risk prospects with up to 90 Bcf Best Estimate Prospective Resources have been identified and mapped with AVO along with, two Proven Undeveloped Discoveries (PUD) with 5 Bcf Gross Contingent Resources, (taken from Reserves and Resources Report conducted in 2019, by NSAI). The prospects are turbiditic channels, typically encountered in the Guadalquivir Basin. The prospects and PUDs offer low cost and very low risk opportunities, that can be easily tied-in to the El Romeral power station or alternatively to the national gas grid. The planning and permitting of a three well drilling campaign is expected to commence in Q1 2020.

Reserves and Resources

Gas reserves from three producing fields; El Ciervo-1, Santa Clara-1 and Sevilla-1:

Contingent Resources for the two PUDs in the El Romeral Licence Area; Romeral-4 Sur and Tarazona:

Unrisked and Risked Prospective Gas Resources, based on risk factor Pg, for the remaining 11 identified prospects in El Romeral:

A copy of the full report by NSAI is available here.

FURTHER INFORMATION ON OWNERSHIP

Tarba is a Spanish affiliate of Prospex, the interest is held through its wholly owned subsidiary PXOG Muirhill, with the other shareholder being Warrego Energy. Prospex has acquired a 49.9% interest in the El Romeral project through B shares of Tarba. The interested parties have agreed to fund their share of costs going forward in line with their respective proportional ownership, whether ordinary

or B shares, according to the Shareholder’s Agreement (‘SHA’) and Supplemental Agreement. The SHA contains usual industry standard provisions for sole risk, default and for the day to day operations.

For more information on Tarba, click here.

The Tesorillo Project (“Project” or “Tesorillo”) in Cadiz Province in southern Spain contains a known gas discovery, which has the potential to hold gross unrisked Prospective Resources of 830 billion cubic feet of gas (Best Estimate), with upside in excess of 2 Tcf, according to a Competent Person’s Report undertaken by Netherland Sewell and Associates (“NSAI”) in 2015.

Tesorillo comprises two petroleum exploration licences, the Tesorillo and Ruedalabola Permits, which cover 38,000 ha in total. Both permits enjoy excellent access to infrastructure, as the project is located 3.9 km from the North African Maghreb gas pipeline European landing point, providing easy access to the high-priced European gas market.

Tesorillo

Tesorillo contains the Almarchal-1 discovery well that was drilled in 1956-57 by Spanish operator Valdebro. The well intersected a thick section of possible gas pay, including some zones which flowed gas to surface on testing.  The section encountered has multi-Tcf potential and is located on a gravity and seismically delineated thrust ramp anticline, with closure area exceeding 70 km2. Drillstem tests and log analysis confirm 48 m of gas pay from two Miocene Aljibe Formation sandstone intervals, with a further 492 m of potential gas pay interpreted from logs yet unconfirmed by testing.

The operator and licence holder Tarba Energia S.L. (“Tarba”) is carrying out a work programme to test the known gas bearing sandstone sequences and de-risk the gas discovery on Tesorillo. A Competent Person’s Report by Netherland Sewell and Associates (“NSAI”) in 2015, estimated Prospective Resources of 830 Bcf (Best Estimate), with an upside of more than 2 Tcf.

The work programme includes general field studies required for the Environmental and Social Impact Assessment (‘ESIA’) report submission to the Regulator. Recently reprocessed 2D seismic data has been interpreted which, in combination with the new detailed surface structural geology and satellite imagery interpretation, is providing further confidence about the subsurface geometry of the exploration target. These studies have led to the identification of four additional leads in the northern part of the block.  Further geophysical studies are required, but these leads demonstrate additional prospectivity in the block that has been previously unknown. Multiple tests for an Audio Magnetotelluric survey (‘AMT’) have been conducted already, however the complex geology of Tesorillo requires further field calibration. The AMT survey will assess the subsurface geology on the licence area, and test for resistivity, serving as an additional indicator of hydrocarbon presence.

Ruedalabola

Ruedalabola contains the 1957 Puerto de Ojan-1 well, located 15km to the east of Almarchal, which displayed similar gas shows to Almarchal-1 but couldn’t be tested for mechanical reasons.

Further Information on Ownership

Prospex has the option to acquire up to 49.9% of Tarba through ordinary shares, which has a 100% interest in Tesorillo. Prospex originally acquired 2.5% of Tarba in December 2017. In December 2018, Prospex exercised an option to buy another 12.5% and currently holds a 15% interest. The Company has the option to increase its overall interest to 49.9% by obtaining 34.9% of Tarba’s for €1,725,000.

The option to increase its interest to 49.9%, is valid up to 6 months after finalising preparations for the first modern well, including permitting and identifying a suitable rig at Tesorillo. As such Prospex is not likely to increase its stake for the foreseeable future.

For more information on Tarba, click here.

Prospex holds a 37% economic interest in the Podere Gallina Exploration Permit, with partners Po Valley Energy, the Operator, holding the remaining 63%.

The permit is situated onshore N. Italy, in the prolific Po Valley Basin, with a proven hydrocarbon system where over 5,000 wells have been drilled historically. The block was operated by ENI and produced 83 BCF from 1960 to 1984 and it contains the Selva Malvezzi Gas-Field (‘Selva’) production concession (preliminary awarded). It was assigned by an independent competent person’s report (‘CPR’) conducted by CGG in 2019; 13.4 BCF P50 Reserves at the Selva gas field, Gross Contingent Resources of 14.1 BCF 2C and Gross Prospective Resources of 88.2 BCF Best Estimate. For further details, please read below.

The development of Selva gas field

Selva’s development plan has low CAPEX (net to PXEN €c400,000), the first stage is to bring the Podere Maiar-1 well into production. This will be done in two steps. Firstly, the installation of a fully automated gas plant, at the existing well site, with capacity to produce 150,000 cm/d (5.3 mmscf/day) of gas. Then, the tie-in of a 70bar SNAM pipeline to the National Grid, only 800 m away from Podere Maiar-1 well. There are minimal gas processing requirements, as the Selva gas is very high in methane (99%) and has low liquid content.

The production concession application has received preliminary approval from the Italian Government to develop the Selva Malvezzi gas field, covering an area of 80.8 km², in January 2019. The formal technical environmental approval for the development of the gas field, has been received in January 2020 from the Italian Ministry of Environment. This approval is a precursor to final sign off by Ministerial decree, the issuing of the required INTESA (intergovernmental agreement) and the final grant of a production concession from Italy’s Economic Development Ministry Production of the 13.3 Bcf (2P) gas reserves is expected to commence in H1 2021. Assuming success with the other prospects within the permit they will tied into production as well in due course.

The Discovery at Podere Mair-1

Podere Maiar-1d well was drilled in Q4 2017 and encountered two gas bearing reservoirs, C1 and C2, in the Mid-Upper Pliocene sands of the Porto Garibaldi Formation. Production testing in January 2018 of C1 and C2, achieved peak flow rates of 148,136scm/d (5.2mmscf/d) and 129,658scm/d (4.6mmscf/d) respectively on an 3/8 inch choke.

Further Prospectivity within the production concession

The Selva production concession has high prospectivity, containing several prospects and leads which have been identified and evaluated. These opportunities are covered in a number of CPRs, the latest dated 2019.

North and  South Selva

The CPR demonstrated two new prospects, North and South Selva, that are mapped by the north and south crest of the Selva gas field respectively. The prospects share the same concept as Selva, of an updip stratigraphic pinch-out, but differ in that they target Level A and Level B sands. Levels A and B have been produced at the main Selva gas field in the past, and it is anticipated to encounter comparable reservoir properties. The volumes of the two prospects have been categorised as contingent resources, as the intervals have produced historically, and equate to gross 2C 8.9 BCF for North Selva – Level B with CoS of 70%, and 5.2 BCF for South Selva Level A and B with 60% CoS.

Selva East

Selva East, lies along the same play trend as the nearby Minerbio and Selva fields and has estimated 35 Bcf Best Case Recoverable Prospective Resources, with CoS 40%.

Fondo Perino

Fondo Perino prospect also lies along the same play trend as Minerbio and Selva fields, and has estimated 14.6 Bcf Prospective Resources with 34% CoS.

Riccardina

The Riccardina prospect is situated within the production concessions, at a distance of c. 5 km from the Podere Maiar well. Best Case Prospective Resources are estimated at 38.8 Bcf with 21% CoS.

Reserves & Resources

The CPR, assigned the following reserves and resources: