Rose Petroleum gives out some positives but also one disappointment in its latest update on its Shale and conventional assets in Utah

By Stewart Dalby

AIM listed oil & gas start-up Rose Petroleum gave out some positives but also one disappointment in its operational and corporate update issued at the end of April. But overall it continues to make headway in its plan to build a substantial oil & gas company based on shale and other non-conventional and conventional assets in Utah in the US.

Rose listed in London early in 2014, and in March 2014 signed an agreement which gave it a 75 per cent working interest in 250,000 net acres in Grand and Emery counties in the highly prospective Uinta and Paradox Basins. The Uinta Basin contains the Mancos Development area with lots of shale potential.

The outlook for the acreage it acquired is very good. Ryder Scott has estimated the Mancos and Paradox combined Prospective Recoverable Resources (Best Case – “P50”) are 1.45 billion barrels of oil and 4.79 trillion cubic feet of gas.

In mid-year 2014 the company raised £6.5million to further its ambitions. In October it signed a rig contract and secured state approval to drill its first shale well in the Uinta Basin. It also completed an acquisition which brought maiden production onto the books.

Then in December the company raised a further £3.5 million. The placing, at 1.75p, was at a discount of 12.5 per cent to the earlier £6.5million raise but given that the oil price climate had deteriorated by December, it was good going to raise the money.
In October Rose paid US$1.5million for privately-owned SEP, which added mid-stream assets and a collection of producing and shut in wells known as the Cisco Dome project. The production might only be a dribble but it does bring US$50,000 a month to the party and it all helps.

The disappointment in the latest update concerns the State1-34 Mancos well, Uinta Basin, Utah. The well was a multiple intervals one involving the Mancos shale as well as a deeper conventional target, believed to be a liquids- rich gas reservoir.

On April 28 Rose said: “The company was hopeful that limited early stage cash flow would be achievable from the target located beneath the Mancos Shale. However, as announced, following completion of this target, this was deemed unviable. Analysis of the electrical logs showed that, whilst the conventional zone was present, it was unviable as a result of the wellbore intersecting a close existing vertical fracture filled with water which in turn exposed the conventional zones to water making them uncommercial.

“Having completed the well in the conventional target and based on the orientation data from the core analysis, the company can no longer use the 1-34 vertical well for the horizontal leg. |In order to drill the horizontal, the company would be require to permit a whole new location stepping away and drilling laterally towards the 1-34 existing well location.”

Despite this disappointment, there was other news about the Mancos shale and this was positive. Rose said core results from the Mancos Shale reconfirm the area’s prospectivity and have provided the company with the positive technical data it hoped for – full core analysis results for Q2 2015.

Positive steps are being taken towards gaining permits for six new Mancos wells with a focus on submitting the ‘final authority to drill plan’ to the Bureau of Land Management (BLM) in late May 2015. Subject to the timely provision of permits, the company anticipates starting drilling the first of these new wells late in 2015. The first horizontal well will be drilled at one of these six new wells locations.

The malaise affecting a lot of small cap E &Ps just now has hit Rose. Its share are currently trading at a 52 week low at 0.70p having touched 4.15p at one point during the year.