8th May 2025 07:00
8 May 2025
Mosman Oil and Gas Limited
("Mosman" or the "Company")
Sagebrush Maiden Helium and Hydrocarbon Contingent Resources
Mosman Oil and Gas Limited (AIM:MSMN) the helium, hydrogen and hydrocarbon exploration, development and production company, announces the first estimate of helium and hydrocarbon volumes at the Sagebrush Project in Colorado, US ("Sagebrush Project").
Highlights
· | Maiden C2 net best estimate Contingent Resources of 205 million cubic feet (mmcf) of helium and 1.7 billion cubic feet (bcf) of hydrocarbon gases at the Sagebrush Project as determined by Mosman utilising a report from Four Corners Helium LLC ("FCH") dated 5 May 2025 in which seismic interpretation indicates a structural closure of circa 585 acres and estimates the initial gas in place volume as 18.4 bcf and recoverable gas volume to be 11 bcf ("FCH Report"). |
· | The combination of existing wells, flow tested helium and hydrocarbons, oil production infrastructure and an existing gas pipeline provide the ingredients to move in stages to a potential fast track helium and hydrocarbon development at the Sagebrush Project. |
· | The fast-track development potential is in addition to the significant exploration prospects identified by seismic at both the Sagebrush Project and the adjacent Coyote Wash Project. |
Andy Carroll, Chief Executive Officer of Mosman, said: "This Maiden Contingent Resource estimates for helium and hydrocarbon gases is a significant milestone, indicating the existing well could be used to fast-track helium production in stages.
"We have all the key ingredients for assessing future development potential with an existing well, gas composition, production facilities and a gas pipeline.
"We are now working on a development feasibility study that will likely include recompletion of the well and an extended flow test, as well as design of production facilities for selling helium via road tanker or pipeline and using the hydrocarbons for power generation and/or sale.
"In addition, at the nearby and separate Coyote Wash Project, the structures at its various Leadville prospects appear on 3D seismic to be larger than the structure mapped at the Sagebrush Project. We will now also commence work on a separate internal resource estimate for the Coyote Wash leases using the Sagebrush data. Given their proximity, these two Projects represent a compelling combination given the data, logistics and potential development synergies."
Sagebrush Project
The Sagebrush Project is in the Four Corners region in Colorado, US which is an area of established helium production from the Leadville formation carbonates from fields such as Doe Creek, 50 miles to the north of the Sagebrush Project.
The Sagebrush Project current oil production is circa 40 bopd (gross) from 7 wells which enable the 10,000 leased acres to be Held By Production. Mosman has existing well data, oil production records and seismic data and recently received test data from the Sagebrush-1 well drilled in 1993 from the previous operator where a drill stem flow test ("DST") conducted in the Leadville Formation flowed gas with 2.76% helium, 34.5% nitrogen, 39.9% carbon dioxide, 19.5% methane and circa 3% other petroleum gases.
At current market prices, the main value of the gas is the helium. The hydrocarbons may have value either for sale or avoiding costs by onsite power generation.
The data has been evaluated by an experienced team of consultants at FCH. The scope of its work includes a detailed petrophysical evaluation of Sagebrush-1 well logs and offset wells in addition to interpretation of the recently reprocessed 2D seismic swath data to determine the area of closure and reservoir parameters.
Seismic Interpretation depth contour map of top of Leadville formation with Sagebrush-1 location (shown as a dot and circle). White dotted line shows area of closure (Source: FCH)
Contingent Resources
Resource Estimate
Mosman has utilised the FCH Report to estimate net C2 Best Estimate Contingent Resources. The resource assessment has been conducted in accordance with standard principles of Petroleum Resource Management (PRMS) which specifically applies to oil and gas reserves and has been deemed suitable for helium by the SPE.
Mosman notes the relevant reservoir zone has been drilled, logged and demonstrated to flow and the existing well is cased and cemented across the relevant zones, and that seismic data has been interpreted to determine the size of the structure. However, more work is required to demonstrate the optimal development, costs and markets, and is currently insufficient to assess commerciality. Work has already started to be able to determine commerciality and to be able to make a final investment decision ("FID") with the initial objective to put this well on production and thereafter determine the commerciality of additional development wells.
Risk
The Sagebrush-1 well flowed and tested helium and hydrocarbon gas in volumetrically significant percentages and shut-in pressures indicated a reservoir that extended beyond the immediate area of the wellbores. The extrapolation of well data to the larger area of closure has some risk and, therefore, the Geological Chance of Success for the Contingent Resource (Pg) is deemed to be 0.75.
Given the favourable location, existing well, infrastructure and helium markets, the probability of commerciality is high, estimated to be 0.7 (Pcom).
Contingencies
Five main contingencies identified for the Sagebrush Project development are:
1) | Drilling & Testing: There is a requirement for more flow testing to
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a) | establish if the untested zones (such as the Lower Leadville) will flow, and the gas composition in those zones.
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b) | determine reservoir pressure and flow rates over a longer time period, as the DST flow period was limited and mud damage appeared to be cleaning up with higher flow rate over time and pressure still rising when DST ended. | |
Once reliable production data is available, the viability of production from the existing well and the number of wells required to be drilled to economically produce the Sagebrush Project can be determined, including understanding of the method of helium and hydrocarbon gas separation. Then a field development plan can be prepared and the contingent resources may be converted to reserves.
2) | Corporate: There has been no final investment decision made by the Company to move forward the Sagebrush Project as a commercial development. The gathering of additional technical data, preparation of a detailed field development plan and associated detailed cost estimates are required to establish the commerciality of the project to make a final investment decision.
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3) | Lease: The current lease may be extended beyond the current 2030 end date for the Company to be able to make a final investment decision.
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4) | Market Access: There is a viable helium and hydrocarbon gas market in Colorado. Gas separation facilities, transport and sales contracts are required for the product to be sold.
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5) | Confirmation of commerciality: Once a field development plan is designed and capital and operating costs are known, only then can economics be calculated to determine commerciality and a final reserve determination made. |
Table 1: Contingent Resources at Sagebrush lease area
Contingent Resources C2 Best Estimate (mmcf) | |||||||||
| Hydrocarbons | Helium | |||||||
Sagebrush | 2,508 | 305 | |||||||
less 18.67% royalty | 468 | 57 | |||||||
Net of Royalty | 2,040 | 248 | |||||||
Mosman 82.5% (net) |
1,683 |
205 | |||||||
Source: Mosman estimates | |||||||||
Notes | |||||||||
1. The estimated quantities of gas that may potentially be recovered by the application of a future development project(s) relate to undeveloped accumulations. These estimates have a risk of development. Further appraisal and evaluation are required to determine the optimal development plan and commerciality. | |||||||||
2. The natural gas resource estimates have been derived in accordance with the principles of the Petroleum Resources Management System (PRMS). The PRMS specifically applies to petroleum. However, the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE) advised in August 2022 that although the gaseous extraction of natural hydrogen and helium is outside of the scope of the PRMS, the principles can be applied given the similarities in exploration, evaluation and exploitation. | |||||||||
3. The resource estimates are presented on a net entitlements basis and represent Mosman's net economic interest in the prospective recoverable hydrogen and helium volumes after deductions for an 18.67% royalty and the 82.5% working interest | |||||||||
4. The Contingent Resources have been evaluated using deterministic methods and represent C2 best estimates. A low case and high case were not estimated. | |||||||||
5. The estimates are for naturally occurring gas only. Adjustments for petroleum gases and inert gases have been made. No adjustment has been made to the estimates to account for fuel and flare | |||||||||
Figure 1 Map of Sagebrush-1 well and Sagebrush and Coyote Wash leases (Source: Mosman)
The FCH Report notes the potential for a dual target Ismay oil and Leadville helium prospect, based on seismic interpretation. This is significant as it may enhance the economics of drilling and development of the Sagebrush Project.
The FCH Report notes that the Sagebrush-1 well reported fluorescence in the Lower Leadville, and this zone has not been included in the resource estimate as it was not flow tested.
The FCH Report also notes that the Sagebrush-1 well provides important data for assessing the Coyote Wash Project, especially as it confirms the presence of helium and the reservoir potential of the Leadville formation in this area.
Future Work Plan:
In addition to the plans to acquire 3D seismic, the current basis for near term planning is expected to include an extended flow testing of the Leadville formation at the Sagebrush-1 well. This may also include flow testing the Lower Leadville formation.
Work has already started on a development plan that is anticipated to take several months to determine the commercial feasibility of development.
Qualified Person Statement
The information contained in this announcement has been reviewed and approved by Andy Carroll, a Director and Chief Executive Officer for Mosman, who has over 35 years of relevant experience in the oil and gas industry and is a Member of the Society of Petroleum Engineers.
The current intention is that this resource estimate by Mosman will be followed up with an external independent consultant's report to assist in any potential future development decision.
Market Abuse Regulation (MAR) Disclosure
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ('MAR') which has been incorporated into UK law by the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via Regulatory Information Service ('RIS'), this information is now considered to be in the public domain.
Enquiries:
Mosman Oil & Gas Limited Andy Carroll CEO
| NOMAD and Joint Broker SP Angel Corporate Finance LLP Stuart Gledhill / Richard Hail / Adam Cowl +44 (0) 20 3470 0470 |
Alma Justine James / Will Merison +44 (0) 20 3405 0205 | Joint Broker CMC Markets UK Plc Douglas Crippen +44 (0) 020 3003 8632 |
Updates on the Company's activities are regularly posted on its website: www.mosmanoilandgas.com
Glossary
boe | Barrels of oil equivalent based on calorific value as opposed to dollar value |
boepd | Barrels of oil per day of oil equivalent based on calorific value as opposed to dollar value |
bopd | Barrels of oil per day |
Contingent Resources | Those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from known accumulations but which are not currently considered to be commercially recoverable. |
Gross Project Production | Means the production of BOE at a total project level (100% basis) before royalties (where Mosman is the Operator) and where Mosman is not the operator the total gross production for the project |
Hydrocarbons | Hydrocarbons are chemical compounds consisting wholly of hydrogen and carbon. |
Known Accumulation | The term accumulation is used to identify an individual body of moveable petroleum. The key requirement to consider an accumulation as known, and hence contain reserves or contingent resources, is that each accumulation/reservoir must have been penetrated by a well. In general, the well must have clearly demonstrated the existence of moveable petroleum in that reservoir by flow to surface or at least some recovery of a sample of petroleum from the well. However, where log and/or core data exist, this may suffice, provided there is a good analogy to a nearby and geologically comparable known accumulation. |
Mcf | Thousand cubic feet |
Bcf | Billion cubic feet |
Mcfpd | Thousand cubic feet per day |
MBtu | One thousand British Thermal Units |
MBtupd | One thousand British Thermal Units per day |
MMBtu | One million British Thermal Units |
MMBtupd | One million British Thermal Units per day |
Mmcf | One million cubic feet |
Net, Net Production | Net to Mosman's Working Interest; Net Production attributable to Mosman means net to Mosman's Working Interest before royalties |
SPE | Society of Petroleum Engineers |
SPE PRMS | A standard for the definition, classification, and estimation of hydrocarbon resources developed by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers and named the Petroleum Resource Management System |
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