Prospex Energy plc / Index: AIM / Epic: PXEN / Sector: Oil and Gas

25 February 2025

Prospex Energy plc

("Prospex" or the "Company")

Operational Update

230% Increase in Net Production Rates since January 2024

Prospex Energy plc (AIM: PXEN), the AIM quoted investment company focused on European gas and power projects, is pleased to provide an operational update on its production, development and drilling schedules across its portfolio of three producing natural gas assets onshore Europe: Viura, Selva and El Romeral.  The net production across Prospex's portfolio of investments is now at ≈86,000 scm/d (≈3.1MMscfd), a 230% increase in production rate from January 2024.  For the ownership of each of the assets in the Company's investment portfolio, please refer to the notes section below.

Prospex Energy Net Production

Viura Production (55% of Net Production)

Gross gas production from the Viura field averaged ≈323,000 scm/d (≈11.4MMscfd) for the month of January 2025, which net to Prospex was ≈47,000 scm/d (≈1.7MMscfd).  The original producing well on the Viura field known as Viura-1 ST3 was not in production in this period.

Viura Drilling Schedule

The two new development wells Viura-3A and Viura-3B are targeted to spud in April 2025.  The procurement of long lead items and the necessary equipment required for drilling are progressing well.

The Spanish Ministry in Madrid officially approved the permit to drill Viura-3A on 24 January 2025.  This was announced in the Official State Gazette on 7 February 2025.

https://www.boe.es/buscar/doc.php?id=BOE-A-2025-2360

The permit to drill the Viura-3B well was approved in 2024.

Selva Production (35% of Net Production)

Gross gas production from the Selva field averaged ≈80,000 scm/d (≈2.8MMscfd) for the month of January 2025, which net to Prospex was ≈30,000 scm/d (≈1.1MMscfd).  Production operations continue to run smoothly from this asset which has achieved gross flow rates of between 78,000 - 80,000 scm/d throughout 2024.

Selva 3D Seismic Acquisition and Drilling Schedule

The 3D seismic acquisition on the Selva Malvezzi concession will now occur in Q3/Q4 2025 since the required permitting for the equipment mobilisation and execution of the project had to avoid the agricultural planting season in the Po Valley, which lasts from 15 March to the end of July each year.  Since the 3D seismic acquisition is scheduled to be completed within a three week period and the data processing and interpretation will be completed immediately following acquisition, it is not expected to result in any delay to the drilling schedules.

The permit applications to drill the four new wells on the Selva Malvezzi concession were officially lodged with the central Italian Ministry in Rome on 24 December 2024.  The current estimate of the commencement of drilling once full permits are received and the necessary equipment has been procured is Q4-2025/Q1-2026.  The Environmental Impact Assessment ("EIA") has been submitted and the statutory consultation process is underway.  Discussions with landowners for access to the required sites is underway and is expected to take several months in parallel with the EIA process.

El Romeral Production (10% of Net Production)

Gross gas production from the El Romeral concessions in Q4-2024 averaged ≈18,000 scm/d (≈0.6MMscfd), which net to Prospex was ≈9,000 scm/d (≈0.3MMscfd).  All the gas was converted into electricity and sold on the hourly spot market generating an average of ≈1,700MW throughout the quarter (≈850MW net to Prospex).

On 11 January 2025, the main 9MW transformer at the El Romeral plant which exports the generated electricity to the national grid failed, resulting in the shutdown of the plant which occurred safely and with no harm to personnel or other equipment.  The local team of the Tarba Energía operator sourced a replacement transformer on rental which was successfully installed and electricity generation re-started on 1 February 2025.  The original transformer was more than 22 years old and its repair was deemed uneconomic and it has been sold for its inherent and valuable scrap value.  The new rental transformer is a higher specification at 16-20 MW and will be replaced by a new appropriately sized transformer in due course.

El Romeral Drilling Schedule

Significant progress was made last week on the permitting process for the five new wells to be drilled on the El Romeral concessions.  As announced on 20 February 2025, the Statutory Consultation of the EIA for the application to drill the five new natural gas wells was publicly gazetted on the State Official Bulletin on 19 February 2025.  The announcement was also published on the Official Gazette of the Province of Seville on 20 February 2025.

This is the link to the official State Bulletin:

https://www.boe.es/diario_boe/txt.php?id=BOE-B-2025-5828

This means that the 30-working day consultation period ends on 4 April 2025.

A new Corporate Presentation for Q1-2025, which contains the latest estimate of these drilling schedules in a GANNT chart is available on the Company's website. https://prospex.energy/investors/corporate-documents

Mark Routh, Prospex's CEO, commented:

"The Company is embarking on an exciting phase of its organic growth strategy with plans to drill 11 natural gas wells across its three production concessions within the next 18 months.  Two of these wells, Viura-3A and Viura-3B are already fully permitted.  The four wells in northern Italy and the five wells in southern Spain are progressing through the necessary regulatory and permitting processes in order to secure the full legal rights to drill once the environmental impact assessments have been evaluated and approved. 

"With energy security rising to the top of the agenda for most European nations, there is now a favourable sentiment for expanding the development of onshore, indigenous natural gas.  Such natural gas production has a fraction of the carbon footprint when compared with the importation of natural gas by pipeline over long distances and an even smaller fraction when compared to the importation of liquefied natural gas.

"Ideally, Prospex will be able to fund the development of the new wells from existing revenues, limiting shareholder dilution.  However, this is dependent on a number of factors including the continued and uninterrupted production of gas,  gas and electricity prices, the timing of bringing the new wells into production, which is subject to permitting, and the availability of other sources of finance. The Company has made significant operational advances in the last six months and I look forward to updating shareholders on our continued progress."

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended by virtue of the Market Abuse (Amendment) (EU Exit) Regulations 2019.

* * ENDS * *

For further information visit www.prospex.energy or contact the following:

Notes

Prospex Energy PLC is an AIM quoted investment company focused on high impact onshore and shallow offshore European opportunities with short timelines to production.  The Company's strategy is to acquire undervalued projects with multiple, tangible value trigger points that can be realised within 12 months of acquisition and then applying low-cost re-evaluation techniques to identify and de-risk prospects.  The Company will rapidly scale up gas production in the short term to generate internal revenues that can then be deployed to develop the asset base and increase production further. 

The Company currently has three non-operated, revenue generating, onshore producing gas investments in Europe with low operational risk:

•     Viura Gas Field, northern Spain (7.24% interest)

•     Selva Malvezzi, northern Italy (37% interest)

•     El Romeral gas to power plant, southern Spain (49.9% interest)

Prospex also owns a 15% interest in the Tesorillo Exploration Permit in Southern Spain, with the option to increase to 49.9% and has identified and hopes to acquire prospective blocks in Poland, which meet the Company's stringent investment criteria.

The Company has no debt finance outstanding.

Net after-tax cash flows are as far as possible and where appropriate, retained within the Company's investment vehicles to fund expected future development costs therein and limit foreign exchange risk.

About Viura:

The Viura-1B development well, which has been drilled by HEYCO Energy Iberia S.L. ("HEI"), reached its revised targeted Total Depth ("TD") of 4,500 metres, which is ≈4,100 metres True Vertical Depth ("TVD"), on 21 October 2024 in the 6-inch hole section of the bottom 450 metres of the well.  Prior to drilling the current Viura-1B well, the Viura producing gas field onshore in northern Spain had an estimated gross original gas in place of 211 Bcf (6 Bcm) and estimated reserves of 105 Bcf (3 Bcm).  To date, just 16 Bcf (0.5 Bcm) of gas has been produced from Viura meaning that the remaining reserves were estimated as 90 Bcf (2.5 Bcm), which is 6.5 Bcf (0.18 Bcm) net to Prospex.

The Viura-1B well was deepened by 450 metres in order to appraise the undrilled Utrillas-B formation and assess if it was gas bearing.  Having confirmed the presence of gas-bearing reservoir quality sandstones in the Utrillas-B, the operator completed this interval with a cemented 4½ inch liner.  The flow testing programme for the Utrillas B section will be performed during the planned plant shut‑down in H2 2025.

The drilling rig has been cold stacked at the Viura-3A/Viura-3B well site locations in preparation for the commencement of drilling in Q2-2025.

Following the shut-in of the Marismas gas concession for its conversion to a gas storage facility, there are now only two producing onshore gas fields in Spain: El Romeral and Viura.  Prospex is a co-owner in both of these concessions and is the only company in Spain owning a working interest in both of Spain's onshore producing gas fields.  Prospex owns a 49.9% share of the El Romeral concessions and a 7.2365% of the Viura concession. 

HEI currently has a 58.7964% interest in Viura.  The other participants in the ownership of the Viura Field Development are Sociedad de Hidrocarburos de Euskadi, S.A. ("SHESA") (owner of the 37.6901% of the Concession) and Oil and Gas Skills, S.A. (owner of the 3.5135% of the Concession).  On 5 April 2024, HEI entered into an asset purchase agreement with SHESA for the acquisition of the participation of SHESA in the Viura Field Development, which is subject to the fulfilment of certain conditions precedent.  Prospex through its 7.5% shareholding in HEI indirectly owns 7.2365% of the Viura concession, its reserves and the existing surface production facilities of the Viura gas plant, which is connected to the Spanish national grid.

HEI acquired its interest in the Viura gas field and became operator in 2022.  A new 3D seismic survey was acquired in 2013.  There is one well in production in the field Viura-1 ST3, which had been shut in until recently.  This well produces intermittently as water production is managed.  There is a workover now underway on the existing produced water disposal well Viura-3 to reinstate its operability.  HEI has permits in place to drill one further development well, Viura-3B, scheduled to start in the second quarter of 2025.  Permits have been submitted to drill a third development well on the concession Viura-3A batch drilled with Viura-3B well in Q2 2025.

The Viura-1B well commenced drilling operations on 22 June 2024.  The new investors (including Prospex) into HEI are funding 31.58% of the development costs to earn 15.79% ownership of HEI.  Prospex is funding 15% of the development costs of the HEI development programme comprising the current well in 2024 and the proposed 2025 two well drilling programme to earn 7.5% ownership of HEI and indirectly 7.2365% of the Viura asset.

Other new investors are funding 16.58% of the development costs to earn an 8.29% ownership in HEI.

The two new wells to be drilled from the first half of 2025 and completed in the second half of 2025 are to be funded from revenues from existing and new production from Viura or from new funds if required.  Since 29 November 2024, Viura-1B has been generating revenues from production from the start of the testing programme.  The 2025 development programme is to be funded by future cash calls or from Phase 1 production or both.

There is a preferred pay-back mechanism for Prospex and all participants (including HEGI and new investors) of this new investment in HEI, the ("HEI Investors").  The HEI Investors will enjoy a 10% interest on their capital investments paid out from the existing and future production from Viura.  Until the HEI Investors have recovered their full capital commitments, plus the 10% preferred interest return, HEGI will not receive production income on their other 50% ownership of HEI over and above operating expenses and an allowance for Spanish taxes and royalties.  This means that Prospex will earn 14.473% of the revenues from the gas production from the Viura field until it has achieved payback of its total expected ≈£8 million capital investment.  The gross cost (including the current Viura-1B well which has already been funded) of the three phase, three-year Viura development programme is estimated at a total of £55.4 million ($70.4 million).  HEGI is funding over 50% of that programme and the new HEI Investors are funding 31.58% through their interest in HEI which earns them an indirect 15.2368% ownership of the Viura asset (net 7.2365% to Prospex).

About Selva:

The Selva Malvezzi Production Concession is in the Po Valley region of northern Italy.  The concession contains the Selva gas-field as well as exciting exploration and development opportunities.  The Podere Maiar-1 well at Selva was completed in December 2017 and successfully found a commercial gas accumulation up-dip of the previous wells on the Selva field.  The Company has a 37% working interest in the Production Concession held via Prospex's two wholly owned subsidiaries, PXOG Marshall Ltd (17% of the Licence) and UOG Italia Srl (20% of the Licence).

The Selva Malvezzi Production Concession holds independently verified 2P gross proven reserves of 13.4 Bcf (5.0 Bcf net to Prospex at 37% WI) in Selva, gross Contingent 2C Resources of 14.1 Bcf (5.2 Bcf net) and a further 88.2 Bcf of gross Best Estimate Prospective Resources (un-risked) (32.6 Bcf net).^[1]

An independent Competent Person's Report of the Podere Gallina Licence which was converted into the Selva Malvezzi Production Concession at first gas in July 2023, was prepared by CGG Services (UK) Limited in July 2022 on behalf of the joint venture.^[1] It attributed a total of 379 MMscm (13.4 Bcf) gross 2P reserves for the Selva redevelopment project.

References:

[1] Source: "Competent Person's Report Podere Gallina Licence, Italy" prepared by CGG Services (UK) Limited in July 2022 : https://bit.ly/44VF02A

About El Romeral and Tarba:

The El Romeral power plant is operated by Tarba, which is based near Carmona east of Seville in the province of Andalucía, Spain.  The El Romeral asset is co-owned through Tarba by Prospex which has a 49.9% working interest and Warrego Energy Limited which has a 50.1% working interest. Warrego Energy is now wholly owned by Hancock Energy (PB) Pty Ltd in Perth Western Australia.

The El Romeral gas and power project in Spain, has natural gas production wells which supply gas to an 8.1MW power plant near Carmona in Southern Spain.  It is currently operating at about 30% of its full capacity because Tarba is waiting on the permits to drill five further infill wells on the concessions to increase production.  Tarba is already categorised as a hybrid energy provider with the successful installation of photovoltaic panels on the roof of the plant in August 2022.  Tarba sells electricity generated from the plant on the spot market in Spain.  The El Romeral licences comprise three contiguous production concessions.

Tarba is pioneering a new hybridisation model that combines natural gas and solar energy as sources for electricity generation in the ecological transition process by developing a project to produce 5MW electricity using photovoltaic solar energy ("Project Helios").

In 2023 and 2024, Tarba supplied enough energy to cover the electricity consumption of approximately 6,700 homes in the area, even when operating the facility at one third of its capacity.  With future wells to be drilled on the concessions, the plant is expected to reach its maximum nameplate production capacity to sell 8.1MW of power into the grid.  The combination of further natural gas extracted from the concessions and the new photovoltaic generation is expected to cover the energy supply of 20,100 homes per year.

Qualified Person Signoff

In accordance with the AIM note for Mining and Oil and Gas Companies, the Company discloses that Mark Routh, the CEO and a director of Prospex Energy plc has reviewed the technical information contained herein.  Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985.  He has more than 40 years of operating experience in the upstream oil and gas industry.  Mark Routh consents to the inclusion of the information in the form and context in which it appears.

Glossary:

scm                           Standard cubic metres

scm/d                      Standard cubic metres per day

MMscm                  Million standard cubic metres

MMscm/d             Million standard cubic metres per day

Bcm                          Billion standard cubic metres

Bcf                            Billion standard cubic feet

MMscfd                  million standard cubic feet per day

MWh                       Mega Watt hour

TTF                            The 'Title Transfer Facility' - a virtual trading point for natural gas in the Netherlands.