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Rose Petroleum’s new Utah deal considered strategically significant

Rose Petroleum’s latest deal in Utah is considered strategically significant as the company continues to put together a new shale business.

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Rose Petroleum’s (LON:ROSE) latest deal in Utah is considered strategically significant as the company continues to put together a new shale business.

Buying SEP - Cisco Dome (SEP) for US$1.5mln the company has strengthened its position in the Utah shale and gas market.

SEP has production assets that adjoin Rose‘s existing acreage, but it also brings a heavily underutilised gas processing plant and access to a natural gas pipeline.

John Blair, chief executive of Rose’s US subsidiary, told Proactive Investors that the deal represents a key element of the company’s development strategy in the Mancos shale.

“This acquisition is not only an acquisition of proved producing reserves, it also adds 11,000 acres of Mancos leasehold, but more importantly it now gives us control of the local gas gathering and full mid-stream system in the area.”

These processing facilities give Rose strategic leverage for future acquisitions, since it now controls the only gathering system in this area, Blair added.

The US company is already generating US$40,000 of revenues per month from the production of 14mln cubic feet and 110 barrels of gas liquids.

In total, SEP has 52 wells upstream over a licence area of 11,000 acres, of which 17 are currently producing and 35 shut-in.

Matthew Idiens, Rose’s chief executive, said the US$1.5mln cash acquisition was a significant step in establishing Rose as a leading operator in the area.

He added it had appointed Ryder Scott Company to update its Certified Resource Assessment Report to include the area over which SEP has rights, which includes deeper oil and gas as well as shale potential.

Ryder Scott will prepare a Certified Reserve Report on the deeper conventional production once Rose has completed its detailed field study of these reservoirs.

Prior to the SEP acquisition, it estimated Rose’s mid-case gross Unrisked Recoverable Prospective Resource Estimates for Rose's leases stood at 486.5 MMBO (million barrels of oil) and 2.9 TCFG (trillion cubic feet of gas).

Rose added it sees significant opportunities to increase production on SEP’s leases from the conventional reservoirs in the form of work overs, recompletions, development drilling and improvements in production operations including through the installation of plunger lifts.

These lifts can increase individual well production in the field by up to three times with a short payback period, it said.

Rose said it also considers that improvements can be made at the gas processing plant to yield additional natural gas liquids.

Idiens added it was a favourable price for the deal and Rose Utah now has significant leverage within this area of operations as it owns the only midstream gas gathering system and gas processing plant in that portion of the area.

Quick facts: Rose Petroleum PLC

Price: 1.05 GBX

AIM:ROSE
Market: AIM
Market Cap: £3.01 m
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