13th Jan 2015 09:18
LONDON (Alliance News) - Northern Petroleum PLC Tuesday said it has revised and lowered its production guidance for February from its existing producing assets in Canada but is hoping a new well, which is currently being drilled, will increase overall production once it is completed.
On December 27, the company said production from its assets in Alberta, Canada, exceeded 500 barrels of oil per day. It said production in February is expected to range between 400 and 550 barrels of oil per day excluding an additional well which is currently being drilled.
Northern Petroleum said the forecast for February was below its previous forecast of 500 to 650 barrels of oil per day.
Northern Petroleum began drilling the 102/11-30 well on January 5, which is targeting a different reef to previous wells drilled by the company. The company said its current assumptions for the well "may be conservative" and said the flow tests in January will determine the total production the company can expect in 2015. The well is not included in the company's production forecasts.
"A thorough technical review of the lessons learned from our 2014 drilling programme has indicated that our current well model assumptions may be conservative with regard to the initial production rate and ultimate recovery from future wells," said Chief Executive Keith Bush.
At the end of December, the company reported a cash balance of around USD12 million and said it has revised its capital programme and reduced corporate costs in light of the challenging oil price.
"The company's management remains focused on keeping the running cost of the business, both in terms of operating expenditure and overhead, as low as possible while continuing the redevelopment in Alberta," said Bush.
Northern Petroleum is expecting to benefit from a decrease in service costs due to the low oil price, which in turn will make the economics of the assets more cost effective by reducing transport costs. It also "significantly reduces the initial capital layout, which currently will have a slower payback period due to the depressed oil price," it said in a statement.
"While the reduced oil price makes the business environment difficult and affects cashflow, I expect the service industry in Canada to react quickly and appropriately such that the operating costs of our production remain proportionate," said Bush in a statement.
Northern Petroleum shares were up 2.1% to 10.85 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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