Assets

The Netherlands

HALO announced early in 2017 that it had, through its subsidiary Hague and London Oil B.V., signed a sales and purchase agreement (SPA) with Tullow Oil Plc for the acquisition of production, reserves and transportation/processing facilities within The Netherlands. The transaction closed in November 2017 thus making HALO a producer of gas (& condensate) as well as being an equity participant in related mid-stream assets.

The Netherlands portfolio comprises interests in:

  • the Northern Area;
  • the Joint Development Area (JDA);
  • fields adjacent to the JDA;
  • the West Gas Transport (WGT) pipeline and processing plant
    at Den Helder; and
  • the WGT Extension pipeline.

The acreage under license spreads over approximately 2,800 sq. km and the assets generated total net production of ca. 2,680boepd in 2017.
The assets benefit from stable field production, long history, positive outlook and the Company sees potential for significant upside in proven undeveloped, probable reserves, contingent resources and prospective resources.
Gas produced from the Netherlands Assets trades in line with the Title Transfer Facility (“TTF”), a virtual trading point for natural gas in the Netherlands.

Figure 1

Joint Development Area

Table 1 - JDA Partners and working interestHALO has a 9.95% interest in the JDA. An overview of the JDA partners and their equity share is given in Table 1, NAM (Shell 50%/Exxon 50%) is the operator. Figure 2 shows an overview map of the Joint Development Area and the fields therein. The key points are: 31 producing fields spanning 7 licence blocks, numerous development and exploration opportunities in a highly prospective gas basin (i.e. low geological risk), additional prospectivity, interests in LoCal pipeline and Den Helder processing facilities, high levels of operational activity (i.e. successful 4D seismic campaign and subsequent wells, foam injection campaigns, compression projects, material cost reductions covering both capex and opex).

Details overview of JDA

L13-FI Development

The L13-FI field was discovered in 1988 by well L13-13. In 1992 a 3D seismic review was carried out by NAM based on 3D poststack depth migrated seismic, including L13-13 time-depth information. This field represents the most recent development within the JDA and the bulk of capex spent within the JDA for 2017-2018. At year end, 2017, the field was expected to come on stream under budget and ahead of schedule. L13-FI represents a material uplift in terms of production for the JDA.

Development of the field commenced in 2017 with the drilling of three production wells and hydraulic fracturing, drilled from a mono-tower connected to the K-15-FA production platform. The first well L13-FI-103 completed drilling in Dec. 2017. The production gas will be exported via the JDA HiCal evacuation system and processed at the Den Helder gas plant.

Well F13 FI 103 completed drilling in Dec 2017. It found the structure deeper than prognosed with 109 m gas column. Reservoir quality was in line with predictions. The well result suggested that reserves were within previous estimates. The second well, L13-FI-102 was drilled early 2018. It showed very similar properties as L13- FI-103. The third well (L13-FI-101) will be drilled in 2018 once the well results are incorporated in an updated reservoir model. The first gas is expected to be delivered in Q3 2018.

The JDA system comprises five processing platforms, of which three have compression facilities. Well head platforms and subsea completions are used to connect the wells to the processing platforms. Two different gas qualities are produced in the JDA area: HiCal and LoCal. LoCal Gas is mainly found in the K15 area and gathered on the K15-FB-1 platform and exported to Den Helder via the LoCal pipeline to the Local processing plant onshore. The WGT Extension and WGT pipeline transport HiCal gas to the Den Helder terminal onshore. The system provides a degree of security of supply: if a platform goes down, other platforms can continue to produce.

The introduction of the high-pressure gas from L13-FI into the K15-FA facilities will likely cause the temporary back-out of lower pressure wells connected to the system. NAM assessed that this back-out, based on their L13-FI production rates, will result in lower rates from other wells between 2018 and 2021 but it also extends the life of these other wells.

K12

The K12-B9 field contains three fault blocks

  • North-East (wells K12-B9ST & K15-FG-106)
  • Central (well K12-B10, no production)
  • West (well K12-B11)

The field is operated by Neptune, apart from well K15-FG-106 which is NAM operated. The unit partners and their interest in the fields are summarized in below:

As the existing production is very small, the K12-B9 unit is scheduled to stop producing in early 2019. Future production from the fields is limited with production anticipated to cease by 2022. The JDA partnerhsip has proposed to Neptune Energy to cease production on K12B and K12-B9 as soon as possible to limit additional costs (i.e. NOx compliance, rerouting, and any potential future cost sharing) unless a compelling case for a commercially viable option is accepted by all parties.

JDA has an under-lift position and there is an agreement between the K15 partners and Neptune that when K12-B9 will stop production, this under-lift volume will subsequently be balanced by JDA through production from K15-FG-106 until it is on balance.

Three wells are producing through the Neptune operated K12-B platform and the Northern Gas Transport (NGT) pipeline to Uithuizen. Well K15-FG-106 is NAM operated and produces through the NAM operated K15-FG platform with export via the WGT; of which HALO owns a participating interest.

K18-Golf

Through its interest in the JDA, the K15 license allows HALO to hold a 2.189% unitised interest in the cross-border K18-Golf field, operated by Wintershall. The most recent well, K18-G2, had led the operator to request additional capacity usage of the K15 facilities and 3D Seismic studies have improved interpretation of the internal reservoir character within the K18-Golf field.

Northern Area (E-Blocks)

E-18A

E-18A was discovered in 2006 and was developed in 2009. The field produced from a total of 3 wells. Production has benefited from the recent compression upgrade at the F16-E facilities. F16-E recently agreed to reduce E18-A tariff from reserved capacity to throughput basis, further increasing the economic life of E18-A.

The E18-A field came onstream in July 2009 with the A1 well. Production from the A2 well commenced the following month, with the field reaching a peak production rate of approximately 2.3 MMscf/d in September 2009. The third development well, E18-A3, was brought onstream in January 2011. The field is considered to be mature at this stage and may be shut-in sometime in 2019.

E18-A Unit partners

F16-E

The field was discovered in 2001, the F16-E field was developed in 2004. The field had produced from up to 4 wells. Production benefited from a compression upgrade at the F16-E facilities. An opportunity may exist to potentially improve recovery by side-tracking existing wells.

F16-E partners

Exploration & Appraisal

HALO’s exploration assets include 5 non-operated exploration licences in the E quadrant of the Dutch North Sea. The Vincent well was drilled in January 2014, Block E-11. The well encountered a 130ft gas column and succeeded in proving the Carboniferous play. Beyond Vincent, numerous prospects have been identified which contain significant potential. In 2015, Neptune farmed in to the licences and assumed operatorship from HALO. There remains potential for significant area development tying in to nearby Neptune equity infrastructure upon further discoveries.

There was very limited activity in the Northern Area in 2017. However, much sub-surface work has been performed in that time. A further exploration well may be drilled in early 2019 based on the recent work and inclusion of new data.

Pipelines and Infrastructure

WGT & WGT Extension

The Company also own equity in the Western Gas Transmission (WGT) system (i.e. WGT 8.88%, WGT-Ext 6.38%); which is a key gas evacuation system in the Netherlands. HALO’s Equity translates into capacity rights in the WGT System and no tariffs due for equity holders. Unused capacity is utilised for third party throughput; third party users pay operating costs plus commercial tariffs for access to WGT.

The tariff income provides a significant income stream while there remains upside potential from tie-ins of nearby discoveries from other companies. WGT required no capital expenditure in 2017 and represented minimal operating costs for owners of the facilities.

HALO has a surplus capacity and would benefit from tariff income from new third party tariff contracts. WGT is ideally positioned to transport gas from new fields in the future while other, nearby operators have reported good success potentially bringing some additional volumes into the system. There remains ullage in both pipelines to accommodate third party production.Western Gas Transmission

Den Helder Plant

The Company also owns 8.88% of the Den Helder processing facilities which is the primary onshore point for receiving gas from the HiCal WGT system, JDA LoCal pipeline and NOGAT trunk-line. The LoCal plant and pipeline is owned by the JDA and all costs associated with these are included in the JDA budget.

The HiCal plant operating costs are shared among the WGT (plus WGT-Extension) system users on a throughput basis. There is the potential to upgrade LoCal system compressor as well as the possibility of combining the facilities with other, similar companies nearby to improve efficiency and reduce operating costs further.

HiCal plant

Philippines

The Company (through its wholly owned subsidiary HALO BV) holds a 15% interest in Service Contract SC54A in the NW Palawan Basin, offshore Philippines. The project holds a number of undeveloped oil discoveries with much remaining exploration, appraisal or development potential for both oil and gas. The license is currently within a “hiatus” and therefore HALO does not need to participate in any material capital expenditure programs. Recent commodity prices have though created renewed enthusiasm for additional appraisal and/or development work.

Although HALO sees much remaining prospectivity, and potential commerciality of existing discoveries in SC54A the Company believes that any capital expenditure program there versus the capital needs in Europe need to be closely monitored and measured. Therefore, HALO may seek to divest of the SC54A in order to better focus on the more, material operations in Europe. However, as there is very limited capital required currently HALO will review the situation during the course of 2018.