Mayan Energy Ltd’s development of Zink Ranch Field, Oklahoma
Mayan, the AIM-listed oil and gas company, has announced that the Company has concluded discussions with its Farm-In partner and consequently will now revert back to retaining a 100% working interest in the Zink Ranch Field in Osage County, Oklahoma.
Mayan has further received a proposal from an established third-party contract operator based on an independent review by a leading geologist in Osage County identifying up to 3.5 million barrels of recoverable oil that can be economically developed through a multi-phase, low-cost development programme. Zink Ranch comprises 1,560 net acres held by current production of approximately six barrels of oil equivalent per day. The development programme establishes a 160 gross barrels per day end of 2019 target for Zink Ranch.
Mayan is to retain a 100% Working Interest and 75% net revenue interest in Zink Ranch following successful negotiations with its former Farm-In partner on the Field, Longview Oil and Gas LLC (“Longview”) to terminate the Farm-In Agreement dated 11th July 2017. This has no impact on Mayan’s on-going development partnership with Longview at Stockdale and Forest Hill Fields in Texas and purely reflects the identification of a better-suited partner for the development of Zink Ranch.
The Pilot pressure maintenance programme (‘PPMP’) will involve the workover and restoration of production from five existing wells and the conversion of one well to an injection well for pressure maintenance operations - PPMP is scalable enabling field wide rollout subject to initial success. Existing infrastructure at Zink Ranch will limit the cost of the PPMP to under $30,000 per well plus approximately $100,000 to convert one well to injection, purchase a tri-plex pump and make necessary surface improvements to implement the pressure maintenance programme.
The Roke Quad neutron Log tool and other technologies and techniques that have worked well on the Forest Hill and Stockdale Fields will be deployed at Zink Ranch. The plan further identifies, subject to submission of an environmental impact study of nine low risks, shallow, proven drilling locations based on the work of a pre-eminent drilling geologist in the area.
Mayan is in discussions with the author of the plan KVD Oil LLC to oversee the implementation of the revised field development plan as replacement operator and is also in talks with a well-known oil and gas company to participate in the development of Zink Ranch as an industry partner on terms to be finalised. This is expected to fund the PPMP and then potentially further development of Zink Ranch.
The Initial production data from the programme expected in late Q3 2018.
Eddie Gonzalez, Managing Director, said: “We are pleased to have resolved matters at Zink Ranch and agreed on a way forward. Zink Ranch has similar characteristics to the Forest Hill and Stockdale Fields where following workovers of existing wells and the application of new techniques and technologies we recently announced the combined total production of 272 gross / 137 net barrels of oil per day. Specifically, Zink Ranch is a proven oil producing field, with shallow wells and multiple pay zones in an oil-friendly domicile, the State of Oklahoma and furthermore we already own 100% of the asset.
“Adoption of this development plan at Zink Ranch in no way lessens our commitment to growing our well count at the Stockdale or Forest Hill Fields, but rather adds an additional set of wells on which we can implement the technologies and techniques that have proven to be so successful on the Texas fields. Mayan continues to progress towards its near-term target of a total production rate of 500bopd, and we look forward to updating shareholders with updates from across our portfolio.”
An 85% interest in Zink Ranch was originally acquired by the Company in 2014 as a non-operated asset with a local third-party operator in place. The Company made a brief attempt to workover four wells with some initial positive success (see RNS dated 2nd May 2014) however work was delayed partly due to regulatory changes occurring at the time in Osage County, Oklahoma which has now been resolved. Following the oil price collapse of Q4 2014 and a change in focus to developing other assets in the Company’s portfolio, no serious development of the Zink Ranch Field was undertaken.
In the intervening period, Mayan has secured the right to operate Zink Ranch as per the terms of a 2017 agreement with the legacy operator (see RNS dated 26th June 2017). In addition, having its own technical staff, proven well evaluation tools such as the Roke Quad Neutron Log tool, and stimulation technologies and expertise at its disposal, the Company believes Zink Ranch represents a low cost, high impact opportunity to rapidly build production.
An Earn-in Agreement was entered into with Longview in July 2017 however due to delays in securing the operator rights and operational capacity constraints in Oklahoma on the part of Longview (as referenced in the RNS dated 22nd December 2017), an alternative development strategy has been pursued by the Company. Mayan is in discussions with an industry partner with respect to participation in field development on a 50-50 basis