21st Oct 2014 06:55
LONDON (Alliance News) - Northern Petroleum PLC Tuesday said it will turn cash positive early next year, once newly completed wells in Canada are tied in to its existing operations.
The company has finished three wells targeting the Keg River edge reef, with the first well producing a constrained rate of 1,300 barrels of oil per day. The well has been restricted to producing between 80 and 100 barrels of oil per day until it is tied in with the rest of its operations, expected before January 2015, it said in a statement.
The second well encountered a resevoir of oil, but the resevoir is of poor quality. The company is expecting moderate production from the well. The third well found a resevoir of water and will not be developed into production. It has been suspended and Northern are considering using the well for the disposal of water, it added.
The two successful wells are currently producing 140 barrels of oil per day with this expected to increase to 200 to 250 barrels of oil per day once they have been tied in to its operations. With the additional production from the two wells, the company's total production will stand between 500 to 650 barrels of oil per day by January 2015, which will also reduce operating costs, it said.
To tie in all the operations is dependent on weather, since frozen ground is required, it said in a statement.
If the production target is reached in January, the company has forecast it will turn cash positive.
"This well demonstrates the ability of the area to still produce high value production wells. The second and third wells were disappointing from a short term production perspective, but have contributed hugely to the understanding of reservoir development and sweep at the reef edge. The data gained from all three wells will increase the chances of drilling more high production wells as the project progresses," said Chief Executive Keith Bush.
"In less than a year, the company has built a production project which should put the business in a positive cashflow position and has the proven potential to significantly grow production and core value," he added.
Northern Petroleum has planned to conduct another drilling programme in 2015, aiming to drill two new wells to further increase production.
Northern shares last traded at 13.50 pence per share at the close of Monday.
By Joshua Warner; [email protected]; @JoshAlliance
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