16th Feb 2016 09:48
LONDON (Alliance News) - Eland Oil & Gas PLC Tuesday said it can significantly improve production from the Opuama field at a low cost by conducting workovers on its existing wells, as the company tries to grow oil output whilst retaining cash amid difficult market conditions.
Eland Oil is now focused on low cost workovers of its existing wells in Nigeria after proving the difference a workover can make - with one of its well more than doubling its production in the last quarter of the year.
Eland Oil said the Opuama field in OML40 in Nigeria continued to produce strongly in 2015, with the Opuama-1 well exiting the year producing at a rate of 4,500 barrels of oil per day, which is significantly higher than the average production from the well during the year.
From the current 4,500 barrel a day production rate, 2,025 barrels a day are net to Eland Oil.
"Following a highly successful workover of Opuama-1 in the fourth quarter, production from the field increased by more than 50% to 4,500 barrels of oil per day, and has remained at these higher levels since," said Chief Executive George Maxwell.
"We now turn our attention to two further low capital expenditure, high production workovers on OML 40," he added.
Over the next two months, Eland Oil said it hopes to conduct a workover on the Opuama-3 well, which it expects to increase production by between 50% to 100%. The company is also considering re-entering and restarting production from the Gbetiokun-1 well "later this year".
Eland Oil said production from Opuama-3 could reach between 2,000 to 4,000 barrels a day following the workover. Eland Oil plans to target and initiate production from the undeveloped D1000 Upper and D2000 reservoirs - with the hope each reservoir can contribute up to 2,000 barrels a day each.
"The successful completion of these two workover projects are expected to increase production on OML 40 without using a drilling rig, and whilst the Opuama-5 production was disappointing, the anticipated incremental production gains from that well have been largely offset by the better-than-expected performance of Opuama-1," said Maxwell.
The workover on the Opuama-5 well was supposed to deliver incremental short-term production from the E2000 reservoir of between 400 to 600 barrels of oil per day, but a higher-than-expected water cut forced the company to shut-in the well in late January.
Although the workover didn't deliver its main aim, Eland Oil said it provided valuable data on the E2000 reservoir, which it plans to make a drilling target in the future. The Opuama-5 well will be used as a water disposal well, hopefully reducing costs.
Away from Eland's future plans, the company said total liftings from the Opuama field in 2015 amounted to 341,000 barrels, more than treble the amount lifted in 2014, whilst liftings in 2016 have so far amounted to 38,000 barrels.
Alongside the increased production and sales, Eland Oil said it remains on track to achieve its target to lower its operating costs by around 30% by the end of the first quarter. Eland Oil has plenty of financial headroom, reporting a cash balance of USD8.4 million at the end of 2015 which sits alongside its USD75.0 million reserve-based lending facility secured during the year.
Eland Oil has so far drawn down USD15.0 million from that facility, but said a total of USD35.0 million has been "committed".
"Due to their very attractive high production relative to capital expenditure spend, the workovers are excellent candidates to be worked into our reserve based lending facility," said Eland Oil.
In addition to Opuama, Eland Oil said it is considering options of achieving early production at a low cost from the Ubima field discovery by re-entering, completing and producing the Ubima-1 well. The Ubima field is to the east of Opuama, covered by OML 17.
Eland Oil shares were down 0.5% to 27.00 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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