19th Oct 2015 06:41
LONDON (Alliance News) - LGO Energy PLC Monday said the mechanical problems suffered at the GY-678 well on the Goudron field in Trinidad will have "significant cost implications" for the company, and said the lost production from the well will hit its cashflow forecasts.
The well was the last of a seven-well drilling programme on the field and was hit by the mechanical problem in September. The company has been trying to resolve the problem, specifically removing a stuck pipe, but has been unsuccessful.
LGO have now set a cement plug in the well whilst it decides what next step it should take.
"Consequently a cement plug has now been set in the surface casing of the well and the rig has been released, pending a decision on possible re-entry and sidetracking, or re-drilling, to reach the extensive C-sand net oil pay zone previously drilled and logged in the well," it said in a statement.
The unsuccessful recovery attempts are set to cost the company USD1.9 million, and the company is "potentially liable" for the cost of the downhole equipment which was lost due to the mechanical fault, which is expected to cost a further USD1.5 million.
In another blow, the loss of anticipated production from the well has hit the company's cashflow forecasts, forcing it to hold discussions with its lenders.
"The loss of anticipated production from this well has had a negative impact on the group's cash flow forecasts to the extent that the liquidity ratios as specified in the group's banking arrangements with BNP Paribas have dropped below those originally envisaged in the covenants associated with the loan," it said.
"The company is currently reviewing various options in constructive discussions with the bank, however, in the meantime the bank have indicated that no further amounts can be drawn against the facility," it added.
LGO has drawn down USD12.0 million under its banking arrangements with BNP Paribas.
Separately, the company said it is planning a work programme for the Goudron Sandstone in an attempt to increase production to improve the company's cashflow.
By Joshua Warner; [email protected]; @JoshAlliance
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