Horizon Petroleum's Polish Pivot: A Strategic Move Towards First Production

Horizon Petroleum Ltd. (TSXV: HPL) (FRA: HPM) (Tradegate: HPM) has provided an operations update on its progress towards first production from its cornerstone Lachowice gas development in the Bielsko-Biala concession, southern Poland. The company, based in Calgary, has been preparing for the planned workover at the Lachowice 7 ("L7") well since being granted the Cieszyn and Bielsko Biala licences on November 19, 2024 by the Polish government. The successful execution of this workover and the subsequent installation of an early production and sales facility will mark a significant milestone for Horizon, providing its first cash flow and a long-term test of the production performance of the naturally fractured, Devonian aged, limestone and dolomite reservoirs in the L7 well.

Preparatory Work and Timeline

The company has made significant strides in its preparatory work for the L7 workover. Excavation of the L7 wellhead and cellar is complete, confirming the integrity of primary and secondary seals necessary for reactivation of the well. Long lead time materials and services have been identified and are being sourced. An Environmental Impact Assessment Study for the L7 workover has been prepared and submitted to the Ministry of Climate and the Environment, with a preliminary positive response and full approval anticipated in April/May 2025. Surface lease agreements have been signed with all landowners around the L7 well location, and local government authorities have approved the construction of the L7 workover site. Tendering for the field work is expected to start this month.

An official request to move the overhead electrical line that crosses the L7 lease has been approved, with the work anticipated to be completed by end May 2025. This will allow the company to proceed with the civil construction works to build the lease to accommodate the workover rig and associated equipment. The execution of the L7 workover is still on-schedule and anticipated for July/August of this year.

Early Production System (EPF) and Monetization Strategies

Horizon Petroleum has hired an Electrical Engineering company and a Mechanical Engineering company in Poland to review options to monetize gas production from the Lachowice gas field. The options considered include:

1. Gas to Power: Approximately 1.5 million standard cubic feet per day (mmscf/d) gas stream from L7 is processed and fed into an electrical generation facility with a nominal generation capacity of 6MW. This electricity can be tied into existing local grids at a number of locations within 4km of the L7 location.

2. Gas Tie-in: A third-party evaluation has identified a high-pressure gas grid tie-in point approximately 12 km northeast of L7, half the distance of the previous plan, which is expected to result in greatly reduced pipeline costs and faster approvals.

3. LNG/CNG Options: Exploring trucking and marketing options for moving Liquefied Natural Gas (LNG) or Compressed Natural Gas (CNG) to nearby sales points.

The preliminary design of the gas processing facility that will be required to separate the liquid condensate and any free water from the L7 gas stream has been completed. The company has commenced sourcing the required vessels and other process equipment.

Technical Evaluation Work and Future Outlook

The company has contracted a technical team of geoscientists, reservoir engineers, and petroleum engineers in both Poland and Canada. This team will conduct the geological and geophysical evaluations to support the development at Lachowice and to assess the appraisal and exploration potential of the Bielsko-Biala and Cieszyn concessions. Preliminary planning of a 3D seismic survey has commenced in the Bielsko-Biala concession that will provide a more precise, detailed image of the Lachowice subsurface geological structure. The 3D seismic will also be required to optimally locate wells in a second phase, full-field development drilling program.

The L7 workover is still on schedule to be completed by late summer/early fall of this year. A detailed program has been completed and will be submitted to the local Polish Mining Authority for their approval this month. The workover program will consist of upgrading the wellhead, drilling out two existing cement plugs in the wellbore, pressure testing the existing wellhead, drilling and recovering an existing packer, reperforating, acid stimulation, and production testing of the same zone, and completing the well for production once the EPF is installed and ready for operations. The company is targeting gas/electricity sales and first cash flow by Q1, 2026.

Conclusion

Horizon Petroleum's strategic move towards first production in Poland is a significant step in its operational journey. The company's multifaceted approach to monetizing gas production, coupled with its robust preparatory work and technical evaluations, positions it well for success in the European energy market. However, the company must navigate various challenges, including regulatory hurdles, technical issues, and market volatility. As Horizon Petroleum continues to track current market dynamics and regulatory landscapes, investors will be keenly watching its progress towards achieving its first production milestone and beyond.