TIDMAEN
RNS Number : 5495Y
Andes Energia PLC
02 December 2014
2 December 2014
Andes Energia plc
("Andes" or "the Company")
Vaca Muerta Successful oil production test of the VG x-1
well
Vega Grande licence (Andes 100% interest)
The Board of Andes (AIM: AEN; BCBA: AEN) is pleased to announce
that Andes has successfully completed an intervention operation on
the VG x-1 well, testing the Vaca Muerta formation, which is
currently producing oil without being stimulated through hydraulic
fracturing. The VG x-1 well is located on the Vega Grande oilfield
in the Neuquén basin, Mendoza Province, Argentina, and is operated
by Andes.
Highlights:
-- The Vaca Muerta interval in the VG x-1 well is currently
producing 80 bbl/d of oil, without a hydraulic fracturing
stimulation.
-- The VG x-1 well is located in the Vega Grande licence, which
is 100% owned and operated by Andes. The licence covers a total
area of 72,000 acres and is located in the north of the Vaca Muerta
play, close to the La Brea licence (where Vaca Muerta is supposed
to have similar geological characteristics), which is also 100%
owned and operated by Andes. The two Andes operated licenses
combined cover a total area of 105,000 acres, representing
approximately 42% of Andes net acreage in Vaca Muerta.
-- The operations consisted of an intervention in the existing
VG x-1 well (originally drilled in 1984), with a pressure drawdown
and buildup tests performed in the interval of 2612 to 2617 meters
below ground level of the Vaca Muerta formation, where a total
thickness of 66 meters was encountered. The operations were carried
out by the Andes technical and operation team using a workover rig
recently acquired by the company.
-- The Company will perform an extended test installing a sucker
rod pump, using existing Andes facilities and infrastructure to
evacuate the oil. Depending on the production evolution over the
next months and the pressure test interpretation, the Company may
decide to do a further stimulation work in order to lift the
productivity of the well and analyse the change in productivity
behaviour.
Alejandro Jotayan, CEO of the Company, commented: "This
production test in Vaca Muerta is a meaningful advance in the
development of our shale acreage. We are already producing from
shale without needing to frack, reducing costs and the necessary
break-even oil price. It de-risks 30% of Andes' net acreage in Vaca
Muerta, more than doubling our already de-risked acreage; and is
the first Andes operated intervention and production test in Vaca
Muerta. We look forward to continuing to develop our acreage in
this world class play"
For further information please contact:
Andes Energia plc Nicolas Mallo Huergo, Chairman T: +541141105150
Alejandro Jotayan, CEO
Billy Clegg, Head of Communications T: +442079691828
GMP Rob Collins T: +442076472800
Liz Williamson
Westhouse Securities Antonio Bossi T: +442076016100
David Coaten
Qualified Person Review
In accordance with AIM guidance for mining, oil and gas
companies, Mr. Juan Carlos Esteban has reviewed the information
contained in this announcement. Mr. Juan Carlos Esteban, an Officer
of the Group and COO of Andes, is a petroleum engineer with over 30
years of experience and is a member of the SPE (Society of
Petroleum Engineers).
Note to Editors:
Andes Energia is an oil and gas company focussed on onshore
South America with a market capitalisation of circa GBP220m. The
Company has operations in Argentina, Colombia, Brazil and Paraguay,
representing three of the largest economies and three of the four
largest oil producing nations in South America.
The Company has 20MMbbls of conventional 2P reserves in
Argentina and certified resources of 600MMBoe, primarily in the
Vaca Muerta unconventional formation in Argentina and 7.5million
acres across South America.
The Company has approximately 2 million net acres in
unconventional plays including 250,000 net acres in the Vaca Muerta
formation, which is the second largest shale oil deposit in the
world and the only producing shale oil deposit outside of the USA.
Over 250 wells have already been drilled and fracked in the Vaca
Muerta formation.
Andes is the only AIM company on the London Stock Exchange with
exposure to Vaca Muerta.
The Company currently produces 1,700 bbls per day in Argentina
from 7 conventional fields, with positive cash flows generated.
Andes Energia, with its partner YPF, has 30 wells planned over the
next 12 months, which are fully funded by the field production cash
flow.
Technical Summary
The intervention work was carried out on an existing well (VG
x-1) originally drilled in April 1984. At that moment, this zone of
Vaca Muerta formation was perforated (2601 to 2617 mbgl) and tested
during the completion stage. This horizon was isolated by
bridge-plug, in order to produce from the upper horizon of Agrio
and Chachao formation.
The top of Vaca Muerta formation was originally encountered at
2600 mts with a thickness of 66 mts, the basal zone was described
by the mudlog and electric logging as a mudstone (fine-grained
sedimentary rock consisting of a mixture of clay and silt-sized
particles) which prograde to pacstone (carbonate rock that is
grain-supported and has a matrix of micrite).
The current production test consisted on a series of bottom-hole
pressure measurements made during a first period of flow at
constant production rate; during a second period the well was
closed to allow pressure to build-up and then was immediately put
in production.
All planning, technical studies, design and workover operations
were conducted by Andes.
Including this, Andes has recorded production in four different
licenses (from a total of six licenses with potential for Vaca
Muerta shale), which represents 55% of the Andes net acreage in the
play.
Considerations on Argentinean oil domestic market and
regulation
Domestic oil prices in the country are not directly linked with
international price movements, and have not been affected by recent
drops in WTI and Brent levels. Argentina was a net oil exporting
country until 2008 having most of the infrastructure prepared to
transport oil from inland fields to the Atlantic Ocean coast. In
2014 the country started to import crude oil for the first time in
20 years, but part of the refining capacity is located inland near
oil fields, at more than 1,000 km from the Atlantic coastline,
implying a substantial transport cost for imported crude oil.
Additionally, the country is running with a shortage of foreign
currency in the Central Bank reserves, so there is an incentive to
promote the consumption of local crude oil instead of imported oil,
even at a higher price than import parity. Effectively, contracted
domestic light oil prices for December 2014 are around US$ 82-85 /
barrel.
With the recent approval of a new Hydrocarbon law in the
country, licenses with shale resources have been extended to a
concession period of 35 years plus a right to extend for other 10
additional years, establishing a cap in royalties of 15% for the
extended period and giving other incentives for companies to invest
in shale formations.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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