Reabold Resources (LON:RBD), which invests in pre-cash flow upstream oil and gas projects, said last week that it is progressing the conceptual development plan for its West Newton site as predominantly a gas development project. Reabold owns a 56% economic interest in West Newton.
“The potential is there,” states Reabold’s Co-CEO, Stephen Williams. With a substantial hydrocarbon column and resource in place, Williams and his team believe the reservoir contains either light oil with a high gas/oil ratio, or more likely predominantly natural gas with associated hydrocarbon liquids.
Reabold sees positives from latest analysis
An Extended Well Test (EWT) which was carried out in 2021 by CoreLab and RPS Group showed that West Newton could be the largest hydrocarbon discovery onshore since 1973, with gas and liquid hydrocarbons recovered to surface from both wells A-2 and B-1z. However, at the time, the EWT was not able to sustain a consistent flow rate.
But last month, CoreLab completed further analysis indicating further productivity potential from new wells, prompting Reabold’s increased confidence for strong returns. The analysis demonstrated actual fluid flow through many of the reservoir samples supporting the view that optimised development wells could deliver good hydrocarbon productivity.
Analysis has also found that there would be substantially higher production rates from horizontal wells as opposed to vertical wells. Reabold cites initial first month production rates of 35.6 million cubic feet of gas per day – this equates to 5,900 barrels of oil per day (boepd).
Eight-well gas development
Reabold is aiming for a phased eight-well gas development which would target all the recoverable gas from West Newton of 203 billion cubic feet (Bcf) which equates to 25 Bcf of recoverable sales gas per well. Following an initial five well development drilling campaign, Reabold Resources anticipates first gas in 2025.
A further three wells will be drilled in 2028-2030, modelling plateau production rates of 44 Mcfd (44,000 cubic feet per day) of sales gas. Reabold’s economic models estimate a gross pre-tax NPV of $448 million and a pre-tax IRR of 87% (using a 10% forward discount rate), based on recoverable sales gas and small volumes of associated liquids, for the development.
Subject to funding
Yet Reabold’s latest update mentions that the conceptual plan is still subject to funding, but gives no indication of how they plan to resolve this, even with the potential Victory sale only eight weeks away. Reabold should receive a fee of around £250k for this, which they consider to be an attractive valuation. Last month Corallian Energy which is 49.9% owned by Reabold and which has a 100% interest in the Victory Gas discovery in the West of Shetland, received a non-binding conditional offer to acquire the Victory project.
It is worth noting that the company has no debt and no significant liabilities according to the latest annual report. But after five years of losses – in 2021 and 2020 losses were £2.6m and £2.7m respectively – and a share price down 17% in the last month, now hovering around 0.28p, it looks as if Reabold Resources needs to promise more than just potential.
