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“Transformational” year for Highlands Natural Resources as it generates first revenues

Published: 17:09 24 Jul 2018 AEST

onshore oil rig
HNR also 75%-owns a well technology called DT Ultravert

Highlands Natural Resources Plc (LON:HNR) has reported its first revenues during what was a “transformational” six months for the junior oiler.

The London-listed firm brought two wells on stream at its East Denver Niobara project in Colorado earlier this year, generating £2.9mln during the four months ended March 31 2018 (2017: Nil).

Highlands also has permission to increase the number of wells at the project up to eight, with work currently underway to do just that.

READ: East Denver drilling completed successfully

The project can also count on a US$58.5mln commitment from a US oil and gas-focused private equity group to support an expansion of up to 24 wells at the site – each of which Highlands would have a 7.5% carried interest in.

In June, the company acquired the West Denver project, also in Colorado, where there is the potential to drill at least 48 wells.

Away from its production arm, HNR has also made “strong strides” with its DT Ultravert technology, which has been proven to prevent ‘well bashing’ and enhance well productivity.

The process involves the injection of nitrogen gas into an existing well at the same time as a new nearby well is fracked.

Highlands has enjoyed some early stage success in deploying the technology but is aware that the profitable and large-scale commercialisation of the service may depend on the company’s ability to improve cost efficiency – and nitrogen supply represents one of the largest cost inputs.

As a result, it has been looking to produce its own nitrogen and reported “significant flow rates” from the Barret 1-14b well at its Kansas nitrogen project last month. Highlands said it was “very encouraged” by the results, with purity levels over 99.59%.

READ: HNR reports “significant” flow rates from Kansas nitrogen project

HNR’s thinking is that if it can start producing its own nitrogen, it will not only reduce the cost for its customers, but it will also improve its own margins and possibly create another revenue stream if it becomes a supplier in its own right.

“This has been a transformational period for Highlands and we are very excited to have reported our first revenues,” said chairman Robert Price.

“This means that we enter the 2018/2019 financial year in a position of strength. We…expect to end the year with a carried interest in eight producing wells which, assuming they are as successful as the first two we drilled, will provide us with a 7.5% working interest in up to 5,000 barrels of oil per day.”

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on 17/7/19