REG - Prospex Energy PLC - Italy: Selva Malvezzi Production Concession Report

Prospex EnergyAnnouncement

31/05/2024 07:00

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RNS Number : 5279Q  Prospex Energy PLC  31 May 2024

Prospex Energy PLC / Index: AIM / Epic: PXEN / Sector: Oil and Gas

 

31 May 2024

 

Prospex Energy PLC

("Prospex" or the "Company")

 

Italy: Selva Malvezzi Production Concession

 

Q1/Q2 2024 Activity Report

 

Prospex Energy PLC (AIM: PXEN), the AIM quoted investment company focused on
European gas and power projects, is pleased to provide an update from the
Selva Malvezzi production concession in Italy following the announcements made
at the AGM of Po Valley Energy Limited ("PVE") (ASX: PVE) on 29 May 2024.

 

Po Valley Operations Pty Limited ("PVO"), a wholly owned subsidiary of PVE is
the operator of the Selva Malvezzi Production Concession, and has a 63%
working interest, while Prospex has the remaining 37% working interest.

 

Q1/Q2 2024 Highlights

·    The Podere Maiar-1 well at Selva ("PM-1") has continued to perform
consistently during Q1/Q2 2024, reaching gross cumulative production of 20.61
MMscm (7.63 MMscm net to Prospex) and generating revenue of €2.6 million for
Prospex by 26 May 2024.

·    Average daily gross production from PM-1 remains steady at a rate of
78,000 to 80,000 scm per day.

·    Gas sold at a premium to the Title Transfer Facility ("TTF") gas
price generates more than £6,100 per day in free cash flow (net to Prospex).

·    Lifting of the inherent hydrocarbon exploration and extraction
restrictions on the Plan for the Sustainable Energy Transition of Eligible
Areas ("PiTESAI") has led to increased access for activities on the Selva
Malvezzi Concession.

·    East Selva may now be drilled from an optimum location, no longer
requiring a highly deviated well thereby reducing risk and cost.

·    Improved regulatory environment and geopolitical landscape in Italy
is leading to a reform of the permitting process and schedules now resulting
in the application to permit four wells on the concession targeting increased
future revenues.

 

Mark Routh, Prospex's CEO, commented:

"In the first half of this year we have seen a significant change in the
regulatory environment in Italy.  The annulment of the areas which were
restricted for hydrocarbon exploration and extraction activities (the
"PiTESAI") has resulted in a reform of the permitting process and the related
environmental impact assessments.  Another benefit of the relaxation of the
'PiTESAI' restricted areas is that the East Selva prospect may now be drilled
from an optimum location no longer requiring a highly deviated well, meaning
lower cost and lower risk.

 

"We will continue to support the operator as it advances activities to
facilitate the development drilling programmes at Selva Malvezzi with the
target of converting the contingent resources at Selva North and Selva South
and the prospective resources at East Selva and Riccardina into proved,
developed and producing reserves in the near term."

 

Selva Malvezzi Production Concession

Gross gas production from the Selva field (PM-1 gas well) in the Selva
Malvezzi Production Concession reached a cumulative 9.8 million standard cubic
metres ("MMscm") (3.6 MMscm net to Prospex) by 31 December 2023, generating
revenue of €1.3 million for Prospex in 2023.  By 26 May 2024 this has
increased to a cumulative 20.61 MMscm (7.63 MMscm net), generating revenue of
€2.6 million for Prospex.  After a period of testing and commissioning, the
PM-1 well is now consistently producing gas at a steady rate of 78,000 to
80,000 scm per day (gross).

The TTF gas price to which the gas sales agreement with BP Gas Marketing is
linked, has risen because of external factors.  The Joint Venture sells the
gas at a premium to the quoted TTF price and is currently generating over
£6,100 per day in free cash flow (net to Prospex).

There has been a significant shift in the political and regulatory landscape
in Italy.  In the first quarter of 2024 the Italian government's Energy
Decree, designed to encourage Italy's energy security, was introduced.  This
included measures to strengthen the security of natural gas supply which is
highly encouraging for the domestic gas production sector.  The Ministry of
Ecological Transition was renamed to the Ministry of Environment and Energy
Security in October 2022.  This has all resulted in one of the most
favourable government and regulatory environments in Italy ever seen, as the
country aims to reduce its reliance on Russian natural gas and imports.

Also in the first quarter of 2024, the Regional Administrative Court of Rome
annulled the PiTESAI.  The former PiTESAI, restricted hydrocarbon exploration
and extraction activities in Italy and its repeal is anticipated to improve
further drilling opportunities at Selva Malvezzi.  Whilst this annulment
created a period of uncertainty in the first half of 2024, the new conditions
have created possibilities to fast-track the approvals for all of the
discoveries and prospects in Selva Malvezzi, which could ultimately bring more
wells into production more quickly than originally envisaged.  PVO's team in
Italy is working closely with the Ministry in Rome to understand and assess
these new opportunities for the concession.

These developments have caused the operator to reassess the optimal outcome
for the Joint Venture in the next few years by capitalising on the window of
opportunity created by the current Italian geopolitical environment and higher
gas prices.

As a result, instead of seeking Ministry approval under the former PiTESAI to
drill the smaller Selva North and South fields from a common pad following a
limited 2D seismic campaign, the operator is now actively pursuing more
ambitious plans to submit applications to drill the larger East Selva and
Riccardina prospects as well as Selva North and Selva South.  In addition,
the East Selva prospect may now be drilled from an optimum location no longer
requiring a highly deviated well.  The Ministerial Authorities have advised
to file all Environmental Impact Assessments on the concession at the same
time, so applying now to drill all four wells is expected to avoid delays.

By including the permit applications to drill the East Selva and Riccardina
prospects at the same time as Selva North and South, the end result should
ultimately be increased cashflow from the concession.

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed
in accordance with the Company's obligations under Article 17 of MAR.

 

* * ENDS * *

 

For further information visit www.prospex.energy (http://www.prospex.energy)
or contact the following:

 

 

 Mark Routh                                      Prospex Energy PLC            Tel: +44 (0) 20 7236 1177
 Ritchie Balmer                                  Strand Hanson Limited         Tel: +44 (0) 20 7409 3494

Rory Murphy
 Andrew Monk (Corporate Broking)                 VSA Capital Limited           Tel: +44 (0) 20 3005 5000

Andrew Raca / Alex Cabral (Corporate Finance)
 Ana Ribeiro / Susie Geliher                     St Brides Partners Limited    Tel: +44 (0) 20 7236 1177

 

Notes

Prospex Energy PLC is an AIM quoted investment company focused on high impact
onshore and shallow offshore European opportunities with short timelines to
production.  The Company's strategy is to acquire undervalued projects with
multiple, tangible value trigger points that can be realised within 12 months
of acquisition and then applying low-cost re-evaluation techniques to identify
and de-risk prospects.  The Company will rapidly scale up gas production in
the short term to generate internal revenues that can then be deployed to
develop the asset base and increase production further.

 

About Selva:

 

The Selva Malvezzi Production Concession is in the Po Valley region of
northern Italy.  The concession contains the Selva gas-field as well as
exciting exploration and development opportunities.  The Podere Maiar-1 well
at Selva was completed in December 2017 and successfully found a commercial
gas accumulation up-dip of the previous wells on the Selva field.  The
Company has a 37% working interest in the Production Concession held via
Prospex's two wholly owned subsidiaries, PXOG Marshall Ltd (17% of the
Licence) and UOG Italia Srl (20% of the Licence).

 

The Selva Malvezzi Production Concession holds independently verified 2P gross
proven reserves of 13.4 Bcf (5.0 Bcf net to Prospex at 37% WI) in Selva, gross
Contingent 2C Resources of 14.1 Bcf (5.2 Bcf net) and a further 88.2 Bcf of
gross Best Estimate Prospective Resources (un-risked) (32.6 Bcf net).( 1 )

 

An independent Competent Person's Report of the Podere Gallina Licence which
was converted into the Selva Malvezzi Production Concession at first gas in
July 2023, was prepared by CGG Services (UK) Limited in July 2022 on behalf of
the joint venture.( 1 ) It attributed a total of 379 MMscm (13.4 Bcf) gross 2P
reserves for the Selva redevelopment project.

 

References:

 1  Source: "Competent Person's Report Podere Gallina Licence, Italy" prepared
by CGG Services (UK) Limited in July 2022 : https://bit.ly/44VF02A
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbit.ly%2F44VF02A&data=05%7C01%7Cana%40stbridespartners.co.uk%7Ce27db61066ba4edeed3f08db94f7d5a5%7C48b7268319d344289c4b73cf144d89ed%7C1%7C0%7C638267564391602202%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=glSh9awfUUAreAZfLeRjoo%2FtRCIsIW2TSML5zO%2FUkew%3D&reserved=0)

 

Glossary:

scm                        Standard cubic metres

scm/d                   Standard cubic metres per day

MMscm               Million standard cubic metres

Bcf                          Billion standard cubic
feet

MMscfd               million standard cubic feet per day

MWh                     Mega Watt hour

TTF                         The 'Title Transfer
Facility' - a virtual trading point for natural gas in the Netherlands.

 

 

Qualified Person Signoff

In accordance with the AIM notice for Mining and Oil and Gas Companies, the
Company discloses that Mark Routh, the CEO and a director of Prospex Energy
plc has reviewed the technical information contained herein.  Mark Routh has
an MSc in Petroleum Engineering and has been a member of the Society of
Petroleum Engineers since 1985.  He has over 40 years operating experience in
the upstream oil and gas industry.  Mark Routh consents to the inclusion of
the information in the form and context in which it appears.

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