Samson Oil & Gas to Repay Vendor Note

DENVER & PERTH, Australia--(BUSINESS WIRE)--

Samson Oil & Gas Limited (ASX: SSN; NYSE MKT: SSN):

Vendor Note

Samson has informed the vendor holding its outstanding $4 million promissory note due May 1^st that it will be paying that note in full. Samson expects to fund the repayment of the vendor note this week with a new term loan from Mutual of Omaha Bank, which will be in addition to its current $20 million revolving line with Mutual of Omaha Bank. The revolving line credit agreement remains substantially unchanged, although the interest rate has been amended to Prime (rather than LIBOR) plus 1%. The new term loan has an interest rate of Prime plus 2.5%. Both the term loan and the revolving debt facility mature in October 2017.

Samson is pursuing several avenues to address the October 2017 maturity, including but not limited to:

1. A refinancing with Mutual of Omaha Bank
2. A partial or full sale of Foreman Butte or
3. A refinancing with an alternate lender

The Company is confident that it will be able to pay off or refinance the facility because of its significant progress in enhancing its asset base through the acquisition and development of its Foreman Butte properties. This progress is amply demonstrated by Samson’s March 31^st estimated oil and gas reserves detailed below.

March 31^st Reserves

Samson has completed its internal report estimating its reserves as of March 31st, 2017. It has been our practice to utilize Netherland Sewell & Associates for our June and December reports and internal estimates for the March and September quarterly reports. The non NSAI reports generally follow the decline curves of the prior report adjusted for any performance variances seen in the interim. The March 31^st 2017 estimate is as follows:

This estimate assumes that the NDIC approves an application to be filed by Samson seeking authority to commence a test water flood program in the Foreman Butte field. The objective of this operation is to increase the reservoir pressure and hence the primary recovery by injecting produced water from the Field into an existing well located on the flank of the Field. As a side benefit, Samson’s disposal cost for produced water would be reduced in addition to the anticipated increase in the PDP reserve value.

The estimate of proved undeveloped reserves has decreased from December 2016 due to an engineering re-design of the development wells. As described in greater detail below, the current plan is to drill two new lateral wells out of the existing Foreman Butte wells. This plan drastically reduces the capital cost to $0.25 million per lateral compared to $2.8 million for a conventional new well. While the capital efficiency of this plan is enhanced, the overall recovery of oil is lower because the laterals are shorter and correspondingly the total NPV of the PUD program is reduced. However this plan still allows for significant increases in PDP without an increase in our debt facility or any other new capital.

By way of comparison the December 31^st, 2016 estimate (completed by NSAI) was as follows:

Oil Price

The WTI oil price used as March 31^st compared to that used in the December 31^st estimate is as follows and has been adjusted for local differentials:

Oil differential

The current estimate uses an oil differential of $4.95 reflecting contracts that Samson has entered into with third party marketers.

Production costs

Production costs have been adjusted in this estimate to reflect the near term cost experience.

Pump efficiency

Samson has completed pump configuration changes on four wells and this has increased these individual well fluid rates by around 40% in line with our expectation, following a project wide fluid level study and pump configuration engineering design.

Infill Development Planning

As noted above, Samson has designed a drilling method for its first Ratcliffe Formation PUD by drilling a new deviated well bore from an existing zero value well. This operation is expected to commence in the next sixty days and will involve a work over rig using slim hole directional drilling tools from the casing shoe of the existing wellbore.

Current planning includes a second lateral, being drilled into the underlying Nesson Formation which has proven productive in an offsetting well. This operation will then be able to use existing surface facilities. The total cost of both short laterals (5,000 feet) is currently estimated to be around $250,000 compared to a new well cost of around $2.8 million.