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Oil production test

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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

Alejandro Jotayan, CEO

Billy Clegg, Head of Communications

 

 

T: +541141105150

 

T: +442079691828

GMP

 

 

Westhouse Securities

Rob Collins

Liz Williamson

 

Antonio Bossi

David Coaten

 

T: +442076472800

 

 

T: +442076016100




 

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 £220m.  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
 
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