Helper Project, Utah
Melbourne, April 30, 2009 AEST (ABN Newswire) - Marion Energy Limited (ASX:MAE)(PINK:MAEJF) advised via an ASX Announcement of February 16, 2009 that it had retained Goldman Sachs to undertake a possible sale of the Company and/or its assets either in whole or in part. An integral element of the process involved the Company commissioning Denver, Colorado based MHA Petroleum Consultants, Inc to independently evaluate reserves for Marion's producing reservoirs on its natural gas properties located in Utah, USA. No new report has been prepared for Oklahoma (January 2008 reserves will therefore be included in this announcement).
The Company advises that the new Reserve Report has now been completed and provides the following information relating thereto. The Company also notes that all reserves mentioned in this release reflect net interests to the Company taking into regard working interest percentages, royalties and economics.
This new Reserve Report shows the reserve estimates remain strong for the Company, even under a current very soft pricing environment, which many believe will improve considerably in 2010. The Reserves should provide a favourable climate within which interested parties may view the Company's assets.
The Reserve Report is also viewed by Marion Directors and Goldman Sachs as a necessary ingredient for a successful sale of the Company as currently being contemplated:
- The Reserve Report creates a basic valuation parameter for the Company.
- The report enables Goldman Sachs to complete the sale Information Memorandum and to finalize the technical data for the electronic data room.
SUMMARY
- This Reserve Report has re-confirmed the commercial viability of the reserves for the producing Clear Creek reservoir with 3P reserves calculated in total at 210 Bcf of natural gas.
- The Company's overall reserves have been negatively impacted as a result of lower natural gas pricing with the Helper reserves in particular being affected and further development at the Helper Ferron CBM field is considered uneconomical at current pricing levels. Nonetheless, the Clear Creek Reserves have been relatively unaffected experiencing only a small reduction in the level of booked reserves.
- Most companies in the US natural gas industry have experienced some reserve declines based upon current soft commodity pricing. The contango futures strip indicates much firmer natural gas prices in the months ahead. Please note that reserves can only be booked in the 1P, 2P or 3P categories if they have positive economics at the price deck used.
- Natural gas price assumptions are US$4.04 per mcf at Clear Creek and $ 4.40 per mcf at Helper.
The Clear Creek reserves were also stress tested at a gas price of US$2.50 per mcf and even at this price all categories of reserves remained economical. This is indicative of the robust economic nature of this project.
- Total Proven reserves are 139.28 Bcfe
- Total Probable reserves are 85.51 Bcfe
- Total Possible reserves are 18.24 Bcf
- Total 3P reserves are 243.03 Bcfe
- These reserves are in addition to the recoverable resource in ground calculation as evaluated by Ryder Scott in November 2008 which calculated Marion having a total potential recoverable resource from its non-producing reservoirs of between 2.4 and 4.3 Tcf (refer to section below which details in summary form the total recoverable resource). A small portion of this resource was included in the Reserve Report of June 2007.
Note: the Reserve Report does not include any allowance for non-conventional Mancos Shale reserves at Helper and Clear Creek, a portion of which were evaluated (drilled) and included in the 2007 Reserve Report. These reserves are now included in the Resource Report prepared by Ryder Scott in November 2008.
KEY ATTRIBUTES OF THE RESERVES/RECOVERABLE RESOURCE
- The net booked 3P reserves totalling 240.03 Bcf represent a significant (partially developed) natural gas resource in the prolific US Rocky Mountain region of the USA. Drilling activities during the last eighteen months have also provided a substantial data base to support future exploitation of this resource.
- These reserves have been tied into the interstate pipeline system by new infrastructure built and commissioned by the Company.
- The upside potential on the Company's leases is large with resource estimates of between 2.4 Tcf and 4.3 Tcf of recoverable natural gas.
- The Company has the scope within its leases for hundreds of drilling locations.
- The drilling inventory should provide an attractive high impact asset base for a potential buyer.
RESERVE REPORT DETAILS--------------------------------------------CATEGORY CLEAR HELPER OKLAHOMA TOTAL CREEK Bcf Bcf Bcf Bcfe--------------------------------------------Proven 119.89 1.89 17.5 139.28Probable 72.319 8.89 4.3 85.51Possible 18.240 18.24Total 3P 210.45 10.78 21.8 243.03--------------------------------------------
Note: Natural gas price assumptions are US$4.04 per mcf at Clear Creek and $ 4.40 per mcf at Helper, reflecting the prevailing gas pricing environment at the time of preparation of the Report.
The depressed natural gas pricing environment (compared to the 2007 report) has reduced the overall booked reserve estimate and it has cut the economic value of some previously booked reserves. This is the case with the Company's Helper Ferron CBM resource, where the relatively low production volumes and the time it takes to de-water the reservoir make new development wells uneconomical in the current commodity price environment.
RESOURCE-IN-GROUND
Note: full details of this Resource were released to the ASX in an Announcement dated 3 November, 2008.
------------------------------------------------------------Project In Place (Tcf) Potential Recoverable Resource (Tcf)------------------------------------------------------------Helper Blackhawk CBM 1.0 0.6Helper Mancos Shale 25.2 2.4-4.3Clear Creek Mancos Shale 5.5 0.2-2.6Clear Creek Emery CBM 0.8 0.6TOTAL 33.5 3.4-4.3------------------------------------------------------------
CEO COMMENTS
Jeff Clarke, Marion CEO commented: "This new Reserve Report is very gratifying in that the reserve estimates are strong even under a soft price environment, which many experts believe will improve in 2010. Therefore, it should allow for a favourable climate within which potential buyers may evaluate the assets of the Company.
Management, in the formative stages of the Company, clearly stated that the primary focus would be to acquire and develop a portfolio of quality oil and gas assets, add value through partial development and seek to monetize the enhanced value of the assets. The Reserve Report detailed in this announcement together with the November 2008 announcement detailing the Recoverable Resource, demonstrate that the Company has been successful in achieving a major part of its initial strategy, namely the proving up of a significant reserve/resource."
With the completion of the Reserve Report, Goldman Sachs can now initiate its mandate.
The Reserve Report has been prepared by MHA Petroleum Consultants, Inc ("MHA"), a Denver, Colorado based company which conducts reserves certification for both conventional and unconventional gas in North America. MHA have conducted reserves certification for a number of Australian Oil and Gas companies. The Reserves have been calculated by MHA in accordance with SPE (Society of Petroleum Engineers/ World Petroleum Council) parameters. Permission to use the reserve figures in this announcement has been granted by MHA. Information on MHA can be obtained from their web site at http://www.mhausa.com
Contact
North American Contact:
Mr Jeff Clarke
Managing Director & CEO
Ph: +1-214-244-7690
Email: jclarke@marionenergy.com
Australian Contact:
Mr Peter Collery
Executive Director and Company Secretary
Ph: +61-3-8862-6466
Email: peter@marionenergy.com.au
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