27th Jun 2016 09:48
LONDON (Alliance News) - Highlands Natural Resources PLC Monday said it has received two reports as part of the geological and economic review of its Helios Two project, which is currently in the process of being sold to fellow London-listed Opera Investments PLC.
The two competent person reports have been received from Knowledge Reservoir LLC dba RPS, which evaluated the helium and natural gas project focused on the resource potential of low saturation gas found in the Muddy formation in south-east Montana.
"RPS has found good evidence of Helium production and has a logical and coherent explanation for the Helium concentrations found as well as support for the fact that the sample in the area could well be representative over a wider area and maybe even pessimistic," said Highlands.
"RPS has estimated the geologic chance of success for the prospect at 80%, with the primary identified risk being the risk of being able to mobilize and produce gas at commercial rates from the highly water saturated gas reservoirs," Highlands added.
The reports have suggested the 100 section development in the Muddy prospect holds a best estimate prospective gross resource of 710.00 billion cubic feet of methane and 2.60 billion cubic feet of helium.
Based on Highlands' 83.33% working interest after royalties, that methane estimate drops to 592.00 billion cubic feet whilst the helium estimate falls to 2.10 billion cubic feet.
"The unrisked P50 indicative success case valuation, before income tax, calculated for the 100 Section development based on capital cost and operating cost estimates built up by RPS is USD341.0 million. This value does not represent any form of market value for the asset and requires several critical events to occur to be achieved including discovery, appraisal, capital expenditure and the successful negotiation of the third-party midstream service contract," said Highlands.
"This indicative success case valuation does not include specific economics for the Helium as it is not possible to estimate Capital and Operating expenditure requirements until the Helium percentage content has been confirmed as the scale of the processing and methodology for extraction will be critically dependent on this ratio," the company added.
Importantly, Highlands has already agreed to sell the subsidiary that holds all of the rights to the project to London-listed Opera Investments Ltd for GBP4.0 million, payable via Opera shares issued at 15.0 pence per share.
Opera noted the announcement by Highlands and said it plans to raise at least USD750,000 in equity once the deal is completed to generate funds for the project.
"Both parties believe that the Helios Two assets represent a significant opportunity to take advantage of a potentially significant helium resource, at a time of global concerns around helium scarcity and helium price increases," said Opera.
Highlands shares were down 7.1% to 24.86 pence per share on Monday whilst Opera shares were untraded, having last closed at 7.50 pence.
By Joshua Warner; [email protected]; @JoshAlliance
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