Dart Energy Updates on UK CBM Assets

Dart Energy provided an update on its activities in the United Kingdom in relation to the company’s coal bed methane (CBM) assets in Scotland, and shale assets in England. 

Coal Bed Methane Activities

PEDL 133 Reserves Update

• Netherland Sewell & Associates Inc (NSAI) has completed a reassessment of the PEDL 133 reserves within the initial Airth project area, based on recent well data and production from pilot wells.
• The results are summarised as follows (all net to Dart):

1. 1P: 1.5 Bcf (estimated present net worth US$8.4m);
2. 2P: 37.8 Bcf (estimated present net worth US$61m);
3. 3P: 37.4 Bcf (estimated present net worth US$26m); and
4. Total (1P + 2P + 3P): 76.7 Bcf (estimated present net worth US$95.4m).

• NSAI did not consider the contingent resource position on the balance of the PEDL 133 licence area, which remains as previously estimated, at 597 Bcf (net), or approximately 5x the current reserves. PEDL 133 Planning Appeal

PEDL 133 Planning Appeal

• On 5 June 2013 Dart lodged an appeal with the Scottish Government for the determination of their planning application to extract CBM in the Forth Valley basin in Central Scotland. This application relates to 14 drilling sites as well as a water and gas treatment and compression plant.
• The company’s application was originally lodged with Falkirk and Stirling Councils in early September 2012, and Dart has agreed to two extensions to the time period in which a local decision was required, thus far providing six months for a decision at the local level.
• However, in the absence of a decision notwithstanding these extensions, and in order to enable the project to move forward on a more clearly defined schedule, Dart has elected to appeal to the Scottish government for a determination. Dart believes the significance of this project to future Scottish and UK energy security of supply makes determination at national level the most appropriate route to a decision on the application, while also offering scope to clarify the public policy approach. A timeline for the appeal process and schedule to ultimate resolution of the application is awaited.

Shale Activities

Cuadrilla Transaction

Privately held UK shale gas explorer, Cuadrilla, announced on 13 June 2013 a transaction whereby a major UK oil and gas producer and integrated energy company, Centrica Plc (market cap £19 billion), would acquire and farm-in to Cuadrilla’s shale gas project in the Western Bowland shale. Centrica will acquire a 25% interest in Cuadrilla’s PEDL 165 licence for a cash consideration of £40 million.

Thereafter, Centrica will fund the cost of a six well exploration program (estimated at £60 million) and fund a further £60 million program on a contingent basis if after initial exploration the project moves into development.

Dart has a sizable acreage position in the same shale play, and thus believes the Cuadrilla-Centrica transaction has provided validation of the value inherent in Dart’s acreage. Specifically Dart has:

• a package of eleven licences in the Western Bowland shale, in two contiguous groups, one group being approximately 50km south of Cuadrilla’s licence area. Dart holds 100% working interest in all of these licences and is the operator.
• a total Western Bowland licence area of approximately 380 sq. miles (Cuadrilla holds 450 sq. miles).
• an independently assessed net gas-in-place (GIP) assessment for shale on its licences in the Western Bowland shale in the range of 30 Tcf – 60 Tcf (as per Netherland Sewell & Associates Inc).

In addition to its position in the Western Bowland, Dart has a sizeable acreage position in the Eastern Bowland shale, where Dart is the largest single licence holder. Specifically Dart has:

• a package of 15 licences in the Eastern Bowland shale. Dart’s total Eastern Bowland shale licence area is approximately 570 sq. miles. Dart has a 100% interest and is operator of all but two of these licences.
• an independently assessed net gas-in-place (GIP) assessment for seven licences covering approximately 235 sq. miles of the core Eastern Bowland shale play in the range of 13 Tcf – 57 Tcf (as per Netherland Sewell & Associates Inc).

Shale Farm-out Process

• The continuing strong gas price environment in the UK (currently above US$10 per Mcf, and at times in recent months over US$11 per Mcf), the strong opportunity for gas producers driven by supply and demand imbalances, and now the Cuadrilla transaction have served to further intensify interest in the UK’s Bowland shale.
• Dart has been engaged in a process designed to farm-out part of its working interest in all or some of its Bowland shale licences. This process has attracted strong interest, with several parties having entered into technical evaluation and due diligence, which is ongoing.
• Dart’s objective is to bring this process to a conclusion over the coming months.

Commenting, CEO of Dart, John McGoldrick, said: “In March we restructured Dart, establishing as the key focus areas and priorities for our company the assets we hold in the UK – both shale and coal bed methane. We are now seeking to progress the exploration and development of these assets. In the case of coal bed methane, we have now secured our first 1P reserves, and appealed for a planning determination to the Scottish Government, which if successful would allow us to move that project forward into full development. In the case of our sizeable UK shale gas portfolio, we are actively seeking farm-out partners, and are encouraged by the vote of confidence in the sector by Centrica’s recent investment in the Cuadrilla licence area. We hope over the coming months to be able to update the market on our own farm-out process, as well as the process and expected timeline for a decision on PEDL 133”.