San Leon shares up 29% on Polish farmout

Poland deal: San Leon strike JV

London-listed San Leon Energy has seen its stock rise by 29% after it signed a joint venture agreement with US start-up Palomar Natural Resources for a number of concessions in Poland.

Palomar will pay San Leon $20 million for a 65% working interest in seven concessions of the southern Permian and northern Permian basin including the Siekierki and the Rawicz tight gas fields.

These funds will be used to move forward production from the fields as soon as possible, the explorers said.

Denver-based Palomar Natural Resources is a newcomer set up last year that is headed by chief executive John Buggenhagen, who was previously San Leon Energy’s exploration director.

Buggenhagen said that "significant exploration upside exists across all seven concessions" in addition to the production base.

San Leon Energy chairman Oisin Fanning said that Buggenhagen “knew the assets as well as anybody”, and would bring US industry experts to the play to “maximize production and ultimate recovery from these significant gas fields”.

The joint venture is divided into two areas, covering seven exploration concessions.

Four blocks - Rawicz, Wschowa, Gora and Nowa Sol - lie in the Permian's south-west Carboniferous basin that is seen as prospective for tight gas in Rotliegendes sandstones as well as shale gas.

The other three concessions - Poznan North and two Poznan East concessions - cover the Siekierki tight gas field.

Four of the blocks were previously part of a planned farmout with US independent TransAtlantic Petroleum who pulled out of a nine-block deal in May despite signing a letter of intent, telling Upstream last month the company had determined that the overall acreage was too exploratory in nature when it was looking for a development project.

London-based analysts Westhouse Securities said San Leon Energy was on the right track in focusing on bringing in a partner to start production and cash flows.

Analyst Mark Henderson commented: “San Leon Energy has had a few false starts over the past 12 months (it did not complete Alpay Enerji deal in Turkey, and the TransAtlantic farm-in has lapsed) and needs to create some operational momentum in the business.”

Palomar will carry San Leon on the first two development wells on the Rawicz gas field, including drilling, evaluation, completion and testing of each well in the Permian Rotliegendes formation.

The first well should be underway by the end of the year.

On the other field, San Leon will be carried for the work over, recompletion and testing of three existing wells to begin later this year.

The work programmes for the fields are trying to shore up resources to justify the construction of production facilities and pipelines.

“If PNR decides to proceed with the development of either or both assets after the above well work, it will include San Leon in seeking project finance,” the company said.

Palomar will now take over as the operator of all the concessions.

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