Natural Resources

A strong portfolio through an effective strategy and diverse projects.

Chairman’s Statement

Since the time of our IPO in 2015, our strategy has been to develop a portfolio of projects whereby approximately 80% of projects generate secure and sustainable revenue while the other projects demonstrate the potential for exciting capital appreciation. As we enter 2019, this strategic objective is well advanced:

 

  • Colorado shale – spearheaded by our East Denver Project, from the end of this month we expect revenues to be more than sufficient to cover overheads for 2019. We continue to examine opportunities to expand the project area as well as monetising our extensive acreage at our West Denver Project.
  • Highlands Water Resources – our innovative plan to address water shortages on fracking sites is already delivering revenue. A core objective for 2019 is to seek to expand these operations and therefore secure a stable services-based revenue for the Company.
  • Kansas nitrogen discovery – this may represent the most exciting development for Highlands in 2019. We are delighted to announce our first commercial sales today and, based on the level of enquiries and ongoing discussions we have at present, we anticipate further positive developments over the coming months.
  • Enhanced oil recovery – we believe that our re-fracking and well protection technology, DT Ultravert, remains a potentially disruptive influence on the oil & gas industry and we continue to examine profitable applications. Securing a proprietary nitrogen supply will make it far more cost effective. Alongside this, but a longer-term objective, is our carbon dioxide asset.
  • Montana Project – this represents a more speculative opportunity for Highlands. Sustainable gas production marks a critical milestone but further work is required before the resource becomes economic.
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Colorado Shale

Work at Highlands’ East Denver Project is making solid progress with the initial production from the six new wells of the project scheduled to start before the end of December 2018. Fracking operations are now complete. As explained above, this represents arguably the most significant milestone in our history as, for the first time, our projected revenues are expected to cover our overheads for the coming year.

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Enhanced Oil Recovery

Highlands is building its reputation across the US oil and gas industry as enhanced oil recovery specialists. The Company’s activities are focused on commercialising and monetising its enhanced oil recovery portfolio, which is comprised of:

 

  • Highlands’ patented DT Ultravert (DTU) technology – proven to prevent well-bashing in both vertical and horizontal wells
  • The Kansas nitrogen project – nitrogen is deployed in DTU applications and therefore this discovery is anticipated to be used as a feedstock which may reduce the price point for future DTU customers and in other EOR applications
  • Carbon dioxide leases in Arizona

DT Ultravert

As operators continue to exploit the oil and gas resources of North America, infill drilling is increasingly becoming more commonplace in most active US shale plays.

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Nitrogen

In Kansas, flow rates from the Barret 1-14B well increased to 2,581 Mcfpd over time, compared to the initial flow rate of 1,769 Mcfpd rate.  Our Kansas operations achieved the desired result in giving us a nitrogen resource with high purity levels.

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Carbon Dioxide

CO2 can also be used to increase the productivity of wells and we were delighted to expand our enhanced oil recovery portfolio through the acquisition, at a minimal cost, of 46,000 acres in Apache County, Arizona of an area believed to be prospective for commercial volumes of this gas.

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Kansas

Following our initial 800-acre acquisition at the end of May 2018, we commenced discussions with the State of Kansas Corporation Commission Conservation Division, who gave us the opportunity of re-entering and re-completing an existing wellbore within its landholding. Flow tests from the Barret 1-14B well, announced on 21 June 2018, indicated high nitrogen purity levels.

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Highlands Water Resources

Hydraulic fracturing operations, which unlocked the potential of shale oil and gas trapped in tight formations of the ground, usually require vast amounts of clean water. The water used in these operations is then recovered alongside the hydrocarbon products extracted. The consequence is that operators can be left with considerable quantities of water to dispose of at the conclusion of each stage of their operation.

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Montana

Highlands holds leases of over 200,000 acres in south-eastern Montana in an area that it considers to be prospective for natural gas and helium.  A January 2017 Competent Person’s Report for the initial 69,120 acre lease holding first acquired by the Company indicated a “best estimate” NPV10 of US$341 million for a natural gas development project alone, with no account given for any potential helium resource (which was subsequently established by Highlands to be present in concentrations of 0.31% to 0.33%).

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