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Rose Petroleum raises £6.5mln in oversubscribed share placing

Rose Petroleum has raised £6.5mln via an oversubscribed share placing – cash it will use to help unlock the huge potential of its property in Utah in the US.

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Rose Petroleum (LON:ROSE) has raised £6.5mln via an oversubscribed share placing – cash it will use to help unlock the huge potential of its property in Utah in the US.

Respected consultant Ryder Scott estimates the group’s interests in the Mancos and Paradox shale plays could contain 1.45bn barrels of oil and 4.79 trillion cubic feet (tcf) of gas.

The numbers have yet to be proven up by drilling, though this is about to change thanks to the cash injection.

The group will:

- permit, shoot, process and interpret 3D seismic between July and December

- drill and complete a horizontal Mancos well in the third quarter

- test a vertical shut-in Paradox well in the third quarter

- “pursue strategic acquisitions”

Rose also revealed that a number of companies have registered an interest in partnering with the group.

The fund-raise, done at 1.5p a share, was organised by Allenby Capital and Pareto Securities.

Chief executive Matthew Idiens said: "This initial financing will allow us to commence the development of our Mancos and Paradox assets and which we anticipate will lead to initial production from the project during the first half of next year.

“We are also pleased that a number of oil and gas companies that have expressed an interest in partnering with Rose on a project level.

“We have a fantastic opportunity in a region with a long history of significant production to dramatically change the future for Rose."

Rose agreed in March to pay US$2mln upfront and committed to spend US$17mln on drilling, to acquire a 75% interest in 230,000 acres split across the Cane Creek property.

Breaking the Ryder Scott numbers down, Paradox is estimated to have 966mln barrels of prospective oil resources and 1.88 tcf (trillion cubic feet) of gas. While the figures for Mancos are 486mln barrels and 2.9 tcf of gas.

Separately, another consultant, Christie Ward Schultz, assigned a US$1.47bn valuation to the Paradox shale (via the Cane Creek project) for a 30 year life-of-field, whilst for Mancos this is estimated at US$941mln.

Over a 10-year period, the valuations for Paradox and Mancos come in at US$660mln and US$503mln respectively.

The consultant estimates Cane Creek’s ‘finding and development’ costs at US$19.50 per oil equivalent barrel, while for Mancos this is estimated at US$16.91. Cane Creek is estimated to have a rate of return of around 125%, and for Mancos it is 96.31%.

Both basins are being actively developed already, and the infrastructure available is excellent with road, rail, pipeline and power all readily available.

The leases, meanwhile, are also in an ideal location being only about an hour's drive to Grand Junction, which is the region's oil and gas services hub offering drill rigs, fracking equipment.

Underlining the potential of this highly attractive shale play is regional player Fidelity Exploration & Production, which is owned by New York-quoted MDU Resources.

Since 1963, it has produced 5.2mln barrels of 44 API oil and 4.2bln cubic feet of gas from 20 wells in Cane Creek.

Currently, 18 wells produce at a total average rate of 4,563 barrels a day and 2.4mln cubic feet of gas.

The real kicker to the valuation will occur when the company actually starts drilling.

Rose is on record as saying it wants to be producing by the end of the year and it is expected the first well will target the Mancos using existing 2D seismic data and information culled from historic wells.

Based on current market prices and rig availability, experts estimate the cost of drilling a 3,000-feet Mancos well with lateral to be around US$3mln.

Quick facts: Rose Petroleum PLC

Price: 0.525 GBX

AIM:ROSE
Market: AIM
Market Cap: £1.51 m
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