31 December 2012 Quarterly Report
Brisbane, Jan 31, 2013 AEST (ABN Newswire) - Texon Petroleum Ltd (
ASX:TXN) are pleased to provide the 31 December 2012 Quarterly Report.
Production
Gross average daily production for the December quarter was 621 mcfgpd and 495 bopd (Texon's share(1): 416 mcfgpd and 332 bopd (401 boepd)) from seven (7) producing wells.
The Company's net average daily production in the December quarter of 401 boepd was a decrease on the Company's September quarter average of 563 boepd, mainly attributable to the Peeler #1H due to natural decline and downtime issues associated with a compressor, Wheeler #1 due to natural decline and downtime associated with the pumping unit, and other natural decline. Quarterly production is down from the corresponding period last year which has been impacted by the sale of our Leighton Olmos and Yegua production from 15 producing wells effective 1 February 2012, in addition to natural decline.
The Hoskins EFS #3H and Quintanilla SMEF #1H wells were brought into production in January. January 2013 net average daily production is about 917 boepd (813 bopd and 623 mcfgpd) as to Texon's share(1).
Production for the quarter and year to date is detailed in the link below.
Eagle Ford Project
During the quarter, three (3) Eagle Ford wells were drilled.
Quintanilla SMEF #1H was spudded on 16 October and drilled to a total depth of 16,458 ft. The pre-drill plan of 18 frac stages was increased to 19 stages and fraccing was completed on 9 January. Production commenced in the second half of January. The initial production rate for the well was 1,705 boepd (1,503 bopd and 1,270 mcfpd) with a flowing casing pressure of 2,665 psi on a 22/64" choke. The Quintanilla SMEF #1H is the first joint venture well drilled in a project where Texon joined with offset lease owners to more efficiently develop acreage held by Texon. Texon has a 48% WI in the well.
Hoskins EFS #3H was spudded on 21 October and drilled to a total depth of 17,156 ft. It was successfully fracced with 24 stages pumped in the 5,592 ft horizontal lateral. Production facilities for this well and the Quintanilla SMEF #1H have been completed. The initial production rate in January for the Hoskins EFS #3H was 2,007 boepd (1,751 bopd and 1,537 mcfpd) with a flowing casing pressure of 3201 psi on a 22/64" choke. Texon has a 95% WI in the well.
Hoskins EFS #4H, the Company's eighth (8th) Eagle Ford well and a lease obligation well was spudded on 6 December and reached total depth of 18,832 ft with a 7,272 ft horizontal lateral. Plans for fraccing and completion are underway with anticipated flow back testing in February-March this year. Texon has a 95% WI in the well.
A Hoskins water well was also drilled during the quarter and is now producing water into the frac pond for use in fraccing on the Hoskins lease.
The locations of these wells are indicated on the map below.
Olmos
Texon has leases covering 3,823 net Working Interest acres in the Olmos formation located in McMullen County in Southern Texas. This project currently has one producing well (Wheeler #1) and one well is shut-in awaiting a refrac (Hoskins #1).
Texon anticipates that approximately 29 wells, each draining a 40 acre area, have the potential to be economically developed in the Olmos reservoir. This prospect is very similar in potential to the Leighton-Olmos field previously discovered and monetised by Texon. Texon is currently reviewing the possibility of a partial sale and farm out of its high Olmos Working Interest which, if successful, could result in an expanded work program in its Olmos project. Should it be implemented, this expanded work program would continue to prove up the total resource potential of 3.0 MMBOE.
Other Projects
Roundhouse leases
Texon has 3,510 net Working Interest acres (which equates to a 47.4% Working Interest) in the Roundhouse (Cotton Valley Lime reservoir) prospect located in Navarro County, Texas.
The prospect will be tested by applying modern horizontal drilling and completion technology to intersect multiple naturally occurring fractures within the Cotton Valley Lime reservoir. An initial test well is planned for 2013. A depth structure map of the Cotton Valley Lime reservoir is set out below and provides further information on the prospect.
East Texas
The Company has identified three prospects in East Texas considered prospective for a shallow oil drilling program (Redfish, Catfish Creek and East Banks prospects). These prospects have been defined with well data, 2D seismic data and historical production data.
Extensive land research has been performed and has identified that much of these prospects are currently available for leasing. Texon has already leased 2,917 net Working Interest acres and intends to continue to lease additional acreage towards a goal of 20,000 acres.
These prospects are targeting a shallow oil reservoir which previously produced oil and gas from old vertical wells with little or no reservoir stimulation. Based on 80 acre spacing and Texon's current 2,917 net Working Interest acres, there are 36 locations that between them have gross potential of 4.7 MMBOE and, if targeted programs to obtain leases to the 20,000 acre target are successful, there may be up to 250 locations with a gross potential of 33 MMBOE.
Corporate
Texon-Sundance Merger and Talon Demerger
On 13 November both the Company and Sundance Energy Australia Limited (Sundance) announced an agreement to merge whereby Sundance would acquire Texon's Eagle Ford assets under a two stage process whereby the Company would demerge its non-EFS assets (Demerger) and Sundance would then acquire all the issued shares in the Company for a consideration of one Sundance share for every two Texon shares (Acquisition).
Texon shareholders will retain the non-EFS assets in a new listed vehicle - Talon Petroleum Limited.
Both proposals will be subject to Texon shareholder and court approvals. The Acquisition is conditional on the approval of the Demerger but, if approved the Demerger will proceed regardless of whether the Acquisition is approved.
The Demerger and Acquisition will be proposed to shareholders under two separate Court approved Schemes of Arrangement on 25 February. A third shareholder meeting will also be held on 25 February to approve:
(a) subject to the Demerger Scheme being approved, the reduction of share capital of the Company by $19,220,000; and
(b) subject to the Demerger and the Acquisition Schemes being implemented, the issue of 4,480,000 new Talon shares to Wandoo Energy as part of the consideration for the acquisition of the Wandoo Working Interests referred to below.
Scheme Booklets despatched to Texon shareholders 24 January 2013
Texon Scheme Meetings 25 February 2013
Second Court hearing to approve Schemes 27 February 2013
Implementation Dates 7-8 March 2013
These dates are indicative only and subject to change.
Acquisition of Wandoo Working Interest
During the quarter the Company announced that, in conjunction with its proposed merger with Sundance, and subject to all necessary approvals and to the completion of the Demerger, it has contracted to buy from Wandoo Energy, LLC (a company associated with Texon Director David Mason) Wandoo's working interest in jointly owned Eagle Ford shale assets in McMullen County, Texas, as of 1 October 2012. The proposed consideration for the acquisition is:
- US$1,200,000 cash payable in four equal quarterly installments, the first payable three months after completion of the demerger; and
- 4,480,000 shares in Talon Petroleum Limited.
The consideration is subject to adjustment downwards (to US$1,000,000 and 4,000,000 shares in Talon Petroleum) if binding agreements with certain landowners are not entered into within 12 months.
This transaction with Wandoo, involving the removal of the Wandoo carried working interest/royalties on Texon's EFS acreage, was a key component of the proposed Merger.
Loan Notes
A senior secured short term funding of $25 million at an interest rate of 20% pa payable six monthly was finalised in December. The funding, which is for a period of 12 months, was provided by a consortium of lenders who were issued non-convertible loan notes as security by the Company.
The funds provided certainty for the Company's planned drilling program into 2013. The facility is repayable on implementation of the proposed Acquisition.
Options
In December 300,000 options were exercised at 26 cents. Agreements have also been put in place with the holders of the balance of the outstanding options, i.e.17,500,000 options, which will have the effect that all those options, which have not also been exercised, will be cancelled on 27 February 2013, if the Demerger is approved by shareholders.
(1) Texon's beneficial NRI share (after Royalties).
(2) Gas is converted to boe on the basis that 6mcf of gas are equivalent to 1 boe.
View the complete Texon Petroleum quarterly report at the link below:
http://media.abnnewswire.net/media/en/docs/ASX-TXN-718139.pdf
Contact
Texon Petroleum Ltd
T: +61 7 3211 1122
F: +61 7 3211 0133
E: texon.info@texonpetroleum.com.au
WWW: www.texonpetroleum.com.au
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