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TALIUS GROUP LIMITED Capital/Financing Update 2006
65893_rns_2006-11-19_1a114b7e-8e5b-45a7-97ee-a5973023ab4b.pdf
Capital/Financing Update
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www.advanceenergyltd.com.au Suite 4, 16 Ord Street # tel: 08 9486 1122 West Perth, Australia | fax: 08 9486 1011 PO Box 1779, ACN 111 823 762 West Perth 6872
ASX Announcement 20 November 2006
Palo Pinto PK1
Advance Energy Limited is pleased to announce that the final purchase and sale agreements in relation to the purchase of further property in Palo Pinto County previously announced on 12th October 2006 have been finalized.
Attached is a final summary of the assets acquired as a result of the transaction, as identified during the final due diligence procedures performed by the Company.
For further information contact: Mr Lance Camacho Company Secretary Telephone: 08 9486 1122 Facsimile: 08 9486 1011
Advance Energy Limited is focused on the acquisition and development of oil and gas producing assets in Texas USA. The company aims to acquire assets with a combination of debt and equity that have current production and cash flow and to enhance production and cash flow through the further development of these assets. Once a property has reached its full productive potential and/or has achieved economic payout to Advance Energy, the Company would look to on sell all or part of its interest. It is the aim of the Company to develop a portfolio of assets which will be developed and traded to maximize returns on funds invested.
Executive Summary of the SECOND Acquisition of Oil, and Gas Assets in Palo Pinto County, Texas
Introduction
Advance Exploration & Production, Inc. ("AEPI"), a Texas Corporation, is a wholly owned subsidiary of Advance Energy, Ltd ("AEL") of Perth, Western Australia. AEPI is entering into a Purchase and Sale Agreement (Closing Date late November 2006 with an Effective Date of September 1, 2006) with Dry Fork Production Co., LLC. of Wichita Falls, Texas to acquire an average working interest of 90% in the following assets for \$9,675,000
- Nine producing wells currently averaging $2,300$ Mcfe1/d
- Average per well LOE of \$1,250 per month
- Approximately $1,015$ net acres held by production and lease
- Three stimulation and one mechanical (PDP Enhancement) candidates
- Five Proved Developed Non-Producing (PDNP or Behind Pipe) candidates
- Three Proved Undeveloped (PUD) locations
- Total Proved Net Reserves in excess of 5.25 Bcfe
- $\bullet$ Eastern acreage being leased by large Barnett Shale operators
North American Energy, Inc. ("NAE"), who serves as AEPI's Operation Manager in the United States, has identified and evaluated these assets and is in the final steps of completing a rigorous due diligence process prior to closing.
These wells produce from various Bend Conglomerate reservoirs at an average depth of 4,100 ft and have produced in excess of 1,100,000 Mcfe in two and a half years of production. It should be noted that several of the wells have been recently drilled and completed. See Appendix "A" at the end of this report for a full summary of each well in this transaction along wit a map depicting the location of the wells and leases.
Development Plan
NAE has formulated a development plan that is designed to maximize the production from these assets to their full potential.
PDP Enhancement Candidates
Within 120 days of the closing of this acquisition, NAE will perform workovers on four wells that have significant PDP Enhancement potential. The wells to be acquired and numerous other Conglomerate wells in the area have responded very favorable to hydraulic fracture treatments,
$\mu$ Mcfe = Mcf of Natural Gas + Barrels of Oil X 6.0 Mcf/Bbl
not only at completion but later in the life of the wells. Three of the wells being acquired are producing from un-stimulated sections of the Conglomerate and will be stimulated as part of the PDP enhancement campaign. Further, an offset to one well will be reentered as a salt water disposal well ("SWD") to enable an existing well to economically produce at 150 Mcfe/d due to low cost disposal of produced saltwater into the said SWD well. It is expected that by performing these workovers that the daily production will be increased by 650 Mcfe/d. Please see Appendix "B" of this report for a detailed summary of the four PDP Enhancement cases.
PDNP Candidates
Five of the wells have significant PDNP zones behind pipe. Starting in early 2007, these reserves will be brought online. The five cases will raise the daily production of these assets by 800 Mcfe/d. Please see Appendix "B" of this report for a detailed summary of the four PDNP cases.
PUD Candidates
NAE has unidentified three PUD locations in which to drill low risk development wells to enhance the drainage of the various Conglomerate reservoirs. It is NAE's plan 60 drill all three PUD wells in succession, commencing the first well in the second quarter of 2007. Each well is estimated to have an initial producing rate of 400 Mcfe/d and an estimated ultimate recovery of 550,000 Mcfe. It should be notes that each successful PUD well could yield up to one additional location, for a potential total of six PUD locations. A detailed summary of the PUD cases can be found under Appendix "B" of this report.
Non-Producing Assets
This acquisition also consists of approximately 1,015 gross acres of deep rights that include the Newark Barnett Shale Field, now the largest gas filed in the continental United States. Numerous operators including XTO, Chesapeake and Conoco-Phillips have been actively leasing minerals 15 miles east of these assets for upwards of \$500/acre.
In summary, AEPI will be acquiring sound PDP assets with a tremendous amount of upside for a price that is well below the recent industry averages for natural gas acquisitions. NAE has an aggressive development plan that once completed will have the total properties producing in excess of 4,000 Mcfe/d. See the Development Summary at the end of this report for a full recap of all development cases.
APPENDIX A
Advance Exploration & Production, Inc. Well Summary for Acquisition of Producing Assets in Palo Pinto County, Texas
| Through August-2006 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| API# | Lease | Well# | Wì | NRI | Field | Well | Well Type Status |
First Prod. |
Current Mef/d* |
Current bbl/d* |
Cumi Gas | Cuml Oil |
| $\parallel$ 42-363-35219 | DENO-GRAGG | -90.00% | 72.0000% | B.R.A. (CONGL.) | G | $Feb-04$ | 50. | 1.0 | 115.495 | 220 | ||
| $142 - 363 - 35293$ | COLEMAN | 90.00% | 71.1355% | B.R.A. (CONGL.) | G | $Dec-04$ | 55 | 4.0 | 76,123 | 4,482 | ||
| $\parallel$ 42-363-35295 | FRANCIS | -90.00% | 72.0000% | B.R.A. (CONGL.) | G. | $Jan-05$ | 10 | 19,255 | 3.028 | |||
| $\parallel$ 42-363-35361 | DABNEY | -90.00% | 71.1355% | SET RANCH (CONGL) | G | $Mav-05$ | 1,150. | 3.0 | 458,143 | 3.555 | ||
| $\parallel$ 42-363-35369 | GRAGG, P. K. | 90.00% | 72.0000% | B.R.A. (CONGL.) | G | $Jul-05$ | -95 | 0.0 | 48,030 | $^{\circ}$ | ||
| 42-363-35385 | GRAGG, DENO | 90.00% | 72.0000% | B.R.A. (CONGL.) | G | А | $J$ un-05 | 140 | 1.0 | 162,513 | 2,717 | |
| $\parallel$ 42-363-35482 $\parallel$ | COLEMAN | -90.00% | 71.1355% | SET RANCH (CONGL) | G | А | Mar-06 | 390 | 1.0 | 79,736 | 214 | |
| $\parallel$ 42-363-35483 | DABNEY | -90.00% | 71.1355% | POSSUM KINGDOM, WEST (CONGL.) | G | А | Mar-06 | 230 | 3.0 | 41.595 | 420 | |
| 42-363-35526 | DENO-GRAGG** | -90.00% | 72.0000% | B.R.A. (CONGL.) | G | А | Aug-06 | 130 | 0.0 | |||
| Totals | 2.250 | 16. | 1.000.890 | 14,636 |
Well Types: $G = Gas$ Well and $I = Injection/SWD$
Well Status: A=Active, PC =Prior completion
** This well came on in August and the current operator reports it making 130 Mcf/d
Lease Map
Exhibit " $\mathbf{B}^n$
PDPE Cases
| Deno Gragg #2 | ||||||
|---|---|---|---|---|---|---|
| IPDP Enhancement | Add 10 ft of perfs and frac the "I" Sand | |||||
| Date | Feb-07 | |||||
| Depth | 4147 | 4157 | ||||
| Workover cost | 75,000 | |||||
| Estimated Additional Recovery this Case | 270.000 | Mcfe |
| Well Name and Number | Deno Gragg #3 | |||||
|---|---|---|---|---|---|---|
| PDP Enhancement | Frae the Conglomerate "I" Sand. This was fraced w/ the | |||||
| MF and pressure data suggests the job went into the MF | ||||||
| Date | $Feb-07$ | |||||
| Depth | 4156 | 4176 | ||||
| Workover cost | 65,000 | S | ||||
| Estimated Additional Recovery this Case | 270.000 | Mcfe | ||||
| Well Name and Number | Coleman #1 | |||||
| PDP Enhancement | Frac the Conglomerate "C" Sand | |||||
| Date | Feb-07 | |||||
| Depth | 3972 | 3978 | ||||
| Workover cost | 65,000 | S | ||||
| Estimated Additional Recovery this Case | 150,000 | Mefe | ||||
| Well Name and Number | Francis #1 | |||||
| PDP Enhancement | Put on Pump and reenter old well for SWD | |||||
| Date | Feb-07 | |||||
| Depth | Existing Completion | |||||
| Comment | This well can make 10x the existing production in | |||||
| an economical manner if the water is disposed of | ||||||
| in a low cost manner. | ||||||
| Workover cost | 75,000 | S | ||||
| Estimated Additional Recovery this Case | 125,000 | Mefe |
Total Incremental Reserves Via PDP Enhancement
Mcfe 815,000
| Well Name and Number | Coleman $#2$ | ||||
|---|---|---|---|---|---|
| PDNP Description | Perf & Frac "A" zone | ||||
| Date | July-07 | ||||
| Depth | 3878 | 3886 | |||
| Workover cost | 75,000 | S | |||
| Estimated Additional Recovery this Case | 317,000 | Mcfe | |||
| Well Name and Number | Dabney #1 | ||||
| PDNP Description | Perf & Frac "F" Zone | ||||
| Date | $July-07$ | ||||
| Depth | 4078 | 4083 | |||
| Workover cost | 75,000 | S | |||
| Estimated Additional Recovery this Case | 204,000 | Mefe | |||
| Well Name and Number | Dabney #2 | ||||
| PDNP Description | Perf & Frac "C" Zone | ||||
| Date | July-07 | ||||
| Depth | 3906 | 3914 | |||
| Workover cost | 75.000 | S | |||
| Estimated Additional Recovery this Case | 205,000 | Mefe | |||
| Well Name and Number | Deno Gragg #3 | ||||
| PDNP Description | Perf & Frac "D" Zone | ||||
| Date | Feb-07 | ||||
| Depth | 4032 | 4035 | |||
| Workover cost | 75,000 | S | |||
| Estimated Additional Recovery this Case | 121,000 | Mefe | |||
| Well Name and Number | Deno Gragg #3 | ||||
| PDNP Description | Perf & Frac Strawn | ||||
| Date | $Jan-09$ | ||||
| Depth | 2508 | 2518 | |||
| Workover cost | 75,000 | \$ | |||
| Estimated Additional Recovery this Case | 144,000 | Mcfe |
Total Incremental Reserves Via PDNP Cases
991,000 Mcfe
| PUD Cases | ||||||
|---|---|---|---|---|---|---|
| Deno Gragg #4 | ||||||
| Conglomerate Zone "I" | ||||||
| Offset Production: Dabney #1, Deno Gragg #2, Coleman #2, Dabney #2 & Deno Gragg #2 | ||||||
| 832,000 Mcfe Average EUR from the "I" Sand | ||||||
| 220,000 Mcfe Average EUR from the "I" Sand | ||||||
| Actively being leased in the area | ||||||
| Produces in the Deno Gragg #3 and other offset wells | ||||||
| Produces in numerous offset wells | ||||||
| \$ | ||||||
| 550,000 | Mcfe | |||||
| Offset Production: Dabney #1, Deno Gragg #2, Coleman #2, Dabney #2 & Deno Gragg #2 | ||||||
| 832,000 Mcfe Average EUR from the "I" Sand | ||||||
| Offset Production: Deno Gragg #1, Coleman #1, Francis #1, PK Fragg #1, Dabney #2 | ||||||
| 220,000 Mcfe Average EUR from the "I" Sand | ||||||
| Actively being leased in the area | ||||||
| Produces in the Deno Gragg #3 and other offset wells | ||||||
| Produces in numerous offset wells | ||||||
| \$ | ||||||
| 550,000 | Mcfe | |||||
| Offset Production: Dabney #1, Deno Gragg #2, Coleman #2, Dabney #2 & Deno Gragg #2 832,000 Mcfe Average EUR from the "I" Sand |
||||||
| Conglomerate Zones "A to H" | ||||||
| Offset Production: Deno Gragg #1, Coleman #1, Francis #1, PK Fragg #1, Dabney #2 | ||||||
| 220,000 Mcfe Average EUR from the "I" Sand | ||||||
| Barnett Shale | Actively being leased in the area | |||||
| Marble Falls | Produces in the Deno Gragg #3 and other offset wells | |||||
| Strawn | Produces in numerous offset wells | |||||
| 400,000 | \$. | |||||
| 550,000 | Mcfe | |||||
| Projected Pay this PUD 10 ft Conglomerate Zones "A to H" Offset Production: Deno Gragg #1, Coleman #1, Francis #1, PK Fragg #1, Dabney #2 Projected Pay this PUD 10 ft Barnett Shale Marble Falls Strawn 400,000 Dabney #3 Conglomerate Zone "I" Projected Pay this PUD 10 ft Conglomerate Zones "A to H" Projected Pay this PUD 10 ft Barnett Shale Marble Falls Strawn 400,000 Francis #2 Conglomerate Zone "I" Projected Pay this PUD 10 ft Projected Pay this PUD 10 ft |
Total Incremental Reserves Via PDNP Cases $1,650,000$ Mcfe
Advance Exploration & Production, Inc. Palo Pinto County PK Project Development Summary
| AEP. | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Lease Name | Well No. | NRI WI |
Development Description | Date | 100% Costl Net cost to | Initial Rate | Gross | Net to AEP | ||
| AEP(S) | (Mcf/d) | Incremental | Incremental | |||||||
| Reserves (Mcf) | Reserves (Mcf) | |||||||||
| Deno Gragg | $\overline{2}$ | 90.00% | $172.00\%$ | PDPE-Add Perfs & Frac | Feb-07 | 75,000 | 67,500 | 200 | 270,000 | 194,400 |
| Deno Gragg | 3 | 90.00% | 72.00% | PDPE-Frac | Feb-07 | 65,000 | 58,500 | 200 | 270,000 | 194,400 |
| Coleman | 90.00% 71.14% | PDPE-Frac | $Feb-07$ | 65,000 | 58,500 | 100 | 150,000 | 106,710 | ||
| Francis | 90.00% | 72.00% | PDPE-Pump | $Feb-07$ | 75,000 | 67.500 | 150 | 125,000 | 90,000 | |
| Coleman | $\mathbf{2}$ | 90.00% 71.14% | PDNP-Perf & Frac | Jul-07 | 75,000 | 67,500 | 200 | 317,000 | 225,514 | |
| Dabnev | 90.00% 71.14% | PDNP-Perf & Frac | Jul-07 | 75,000 | 67,500 | 160 | 204,000 | 145,126 | ||
| Dabney | $\overline{2}$ | 90.00% | 71.14% | PDNP-Perf & Frac | Jul-07 | 75,000 | 67,500 | 150 | 205,000 | 145,837 |
| Deno Gragg | 3 | 90.00% 72.00% | PDNP-Perf & Frac | $Feb-07$ | 75,000 | 67.500 | 100 | 121.000 | 87,120 | |
| Deno Gragg | 3. | 90.00% | 72.00% | PDNP-Perf & Frac | Jan-09 | 75,000 | 67,500 | 180 | 144,000 | 103,680 |
| Deno Gragg | $\overline{4}$ | 90.00% | 72.00% | PUD. | Jun-07 | 400,000 | 360,000 | 400 | 550,000 | 396,000 |
| Dabnev | 3. | 90.00% 71.14% | PUD. | $May-07$ | 400,000 | 360,000 | 400 | 550,000 | 391,270 | |
| Francis | $\overline{2}$ | 90.00% 72.00% | PUD. | Apr-07 | 400,000 | 360,000 | 400 | 550,000 | 396,000 | |
| TOTALS | 1,855,000 | 1,669,500 | 2,640 | 1,806,000 | 1,292,786 |