TIDMBPC
RNS Number : 0687E
Bahamas Petroleum Company PLC
03 November 2020
3 November 2020
Bahamas Petroleum Company plc
("BPC" or the "Company")
Operational Update: Trinidad and Tobago, and Suriname
BPC, the Caribbean and Atlantic margin focused oil and gas
company, with production, appraisal, development and exploration
assets across the region, is pleased to provide the following
operational update in relation to its assets in Trinidad and
Tobago, and Suriname.
Highlights
TRINIDAD AND TOBAGO
-- Substantial increase in field activities, including an
additional rig being deployed into the field to further expand
workover capability/capacity
-- Production decline arrested and early signs of sustainable
overall production increase consistent with strategy and plan;
target baseline production rate of 500 bopd by the end of 2020, as
previously announced, remains unchanged
-- Plans for enhanced oil recovery (EOR) projects submitted for
approval to Trinidad and Tobago regulatory authorities; CO(2)
injection project production well work program approved and
workover commencing imminently
-- Work program defined to appraise Saffron discovery, including
development of the drill plan for Saffron #2, target spud date in
Q1 2021
-- Multiple prospects identified across the South West Peninsula
(SWP) portfolio that are estimated by management to each have +10
MMbbls of recoverable resource potential (i.e. each equivalent in
size to Saffron)
SURINAME
-- Drill plan, work program and environmental studies for the
Extended Well Test (EWT) submitted for approval to Suriname
regulatory authorities; target spud date for the first well in Q1
2021
ACROSS THE PORTFOLIO
-- Rapid progress to the commencement of drilling the
Perseverance #1 well in The Bahamas before the end of this year
-- On track to deliver Competent Person's Report (CPR) in
mid-November 2020, covering all the Company's assets in Trinidad
and Tobago and Suriname
Commenting, Simon Potter, CEO of BPC, said:
"BPC combined its assets with those of Columbus in August 2020
to create a full cycle exploration, development and production
business, with a balanced portfolio of assets representing the full
maturity and risk/reward spectrum of our industry. Since assuming
management of Columbus' assets, we have sought to leverage our
proven operating experience and skills, in pursuit of a simple
short-term aim: to deliver cash flow from operations in Trinidad
sufficient to cover the local operating costs, and thereafter to
ultimately cover the overheads of the enlarged group as we build to
material, profitable production.
In the relatively short period of time since assuming
operational control, we have been extremely busy in taking the
first steps to realising performance improvements in support of
this aim. We have moved quickly to increase activity in the
producing fields to a level not seen for a number of years, defined
the drilling program for Saffron #2, and pulled the levers that we
believe will deliver an increase to each of production, cashflow,
and the existing resource and reserve base. It is an ongoing
process, but we are pleased to be seeing the first green shoots of
operational improvement, with arrested production decline and,
albeit modest, production growth. Collectively, this gives us great
optimism in being able to deliver on our value-creating strategy
for the future.
In parallel, we continue to make rapid progress to the
commencement of drilling the Perseverance #1 well in The Bahamas
before the end of this year. A separate and distinct operational
management and execution group remains entirely focussed on the
successful delivery of this core company objective ."
Operational Update
BPC assumed full ownership of the assets of Columbus Energy
Resources Plc ("Columbus") in Trinidad and Tobago, and Suriname in
early August 2020, less than 3 months ago. In the period since,
management has completed a full review of all aspects of these
operations, which has confirmed BPC's view that the assets present
an extensive range of accessible opportunities to drive increases
to production from the existing fields and facilities, as well as
multiple options to quickly appraise and develop assets for new
production and explore for additional resources. As a first step,
BPC has focused on short-term actions designed to arrest production
decline, and implement actions that lay the groundwork for growing
production sustainably into the future. In this context,
significant operational achievements in the period are summarised
as follows:
1. Operational Review Completed - increasing organisational efficiency
Commensurate with the underlying asset review, a reorganisation
of the Trinidad staff base into more functionally focussed teams
has been completed. This reorganisation has been complemented with
successful placement of experienced personnel into key roles
focussed on production oversight and measurement, operations
supervision and rig management, with the intention of bringing new
technologies, revised well designs and use of improved materials to
bear. The revised organisational set up and high grading of
personnel more effectively prioritises deployment of personnel
resources to the best projects, rather than simply allocating
resources between assets. This ensures the optimal range of field
activities, assuring the delivery of exploration, appraisal and
development plans, and contributing to efforts to reduce the cost
per barrel in operations.
2. Improved Management of Existing Well Stock - arresting
production decline and approaching breakeven
The asset base in Trinidad includes five producing fields with a
total of around 250 historical wells, of which about half are
presently considered capable of ongoing production. At the time of
BPC assuming management responsibility about 80 wells were on
production, and the well workover frequency rate had fallen from
more than 180 per annum (in 2018), to an average rate of around 50
per annum, with most well work planning being a function of repair
rather than proactive maintenance and managed intervention.
As a consequence, prior to BPC assuming operational control,
production had been exhibiting sustained decline over an extended
period of time. For example, at the start of 2019 average daily
production capacity was approximately 600 bopd, but by August 2020
nearly 200 bopd of that production capacity had been lost, and
activity levels were such that BPC estimates production would have
fallen below 400 bopd before the end of 2020, absent intervention.
Over and above this persistent decline, the production rate on a
day-to-day basis was highly variable and inconsistent.
Improved management of existing well stock is fundamental to
success in managing mature fields and achieving sustainable,
reliable production. This involves not only maximising the total
number of wells producing at any one time, but also working to
ensure that producing wells remain on stream for longer. The BPC
management team has considerable experience in proactively managing
mature operations in this way, and has now implemented active
individual well data tracking and daily monitoring/measuring of
performance as a key operational management practice within the
Trinidad and Tobago business. This data set feeds into establishing
a fundamental understanding of which are key wells, leading to
proactive interventions, improved completion design and ultimately
increased overall rates of production.
Consistent with BPC's immediate focus on improving management of
the existing well stock, the following has been achieved since
August 2020:
-- the total number of wells on production has increased by 6%,
as previously producing wells have been brought back onto
production;
-- new completion designs and materials have been installed on
more than 20% of the wells worked over / recompleted to date;
-- the frequency of well workovers has increased, with BPC now
on-track to achieve in excess of 180 workovers by end of 2020
(which is more than 3 times the number achieved during 2019);
and
-- approximately 50 hitherto dormant wells have been inspected
and flow-tested to assess suitability for being reactivated back
into production.
As a result of the above, as at the end of October 2020,
production from existing wells is now consistently averaging around
435 bopd. In absolute terms this represents an encouraging
improvement compared to that which prevailed immediately before BPC
assumed control of the assets. More significantly, this represents
a notable uplift (about 10%) from the decline trajectory embedded
in historical production numbers at the time of BPC's management
assuming control. In other words, as a first phase, BPC believes
that the intense work program initiated since August 2020 has seen
the historical production decline arrested.
Further, the production currently being achieved is considerably
less variable on a day-to-day basis than was evident previously.
BPC considers this an important achievement, as it affords a much
more reliable base upon which to plan, schedule and prioritise new
work, and provides greater ability to focus on enhancement rather
than repair, which is a key underpin to the overall strategy for
production growth in Trinidad and Tobago.
In summary, therefore, BPC considers that work undertaken since
August 2020 has achieved a first significant step of arresting
production decline, and is providing early validation of BPC's view
that once decline is arrested, the Company will be able to
stabilise, maintain and grow production in Trinidad and Tobago from
the base well stock. Accordingly, BPC's target of a baseline
production rate of 500 bopd by the end of 2020, as previously
announced, remains unchanged.
BPC notes, as previously advised, that at this targeted level of
production, overall operating costs in Trinidad and Tobago are
approximately US$20 per barrel, and at a US$40 per barrel oil price
this would result in the Trinidad and Tobago business generating
sufficient cashflow to cover the costs of its own operations. In
the event of production increasing beyond this targeted level,
and/or in the event of the oil price being greater than $40 per
barrel, operations in Trinidad and Tobago would likely be in a
position to generate surplus cash that can be deployed to other
activities across BPC's business.
3. Third Workover Rig Contracted - focussing on reservoir access and connectivity
BPC currently owns and operates 2 workover rigs in Trinidad and
Tobago, but given the focus on increasing the active well stock and
other remedial field work, BPC has now contracted a third workover
rig (Summit Rig #6), which will soon commence work on at least 11
new incremental production projects. These new projects have been
prioritised towards work that is expected to increase reservoir
access and connectivity through the addition of new perforations
and/or cleaning of existing perforations. This is expected to allow
access to previously un-swept oil, translating directly into
sustainable increased production levels from existing wells (rather
than simply effecting repairs that maintain the status quo).
3. Enhanced Oil Recovery Projects - focussing on long-term reservoir pressure improvements
BPC's various Enhanced Oil Recovery ("EOR") projects have been
progressed in the past three months, consistent with the overall
strategy of increasing production on a sustainable basis. In
particular:
-- The CO(2) EOR Pilot project at the Inniss-Trinity block is
now ready to enter Phase 3 of the pilot program. Final approvals
necessary in order to produce oil from the AT-5X well have been
obtained from all applicable regulatory authorities in Trinidad and
Tobago, and it is expected that this activity will commence
imminently, with a view to monitoring production and the potential
production gains resulting from the CO(2) injection; and
-- At the Goudron field, BPC has reviewed and prepared the
technical and environmental reports necessary to begin the planned
waterflood project. Once approved, the project plan includes up to
twelve phases of injection across the field to improve the
reservoir pressure, and subsequently measuring the impact on oil
production.
4. Saffron #2 - progressing an opportunity for potentially rapid
and material increase to production and cashflow
BPC has undertaken a comprehensive review of the drilling
campaign that was undertaken for the Saffron #1 well (a discovery
of undrained light oil in the Lower Cruse reservoir formation) by
Columbus in early 2020. This has included a review of the well
design, its operational execution, and a reassessment of the
technical results from a geological and reservoir perspective. This
work identified a number of operational issues with the Saffron #1
drilling campaign which BPC believes can be managed / optimised in
future activities so as to improve overall asset performance.
More significantly, this work has also confirmed the potential
for a material development of the Lower Cruse formation, as well as
further draining of the Middle Cruse, across the mapped Saffron
field, and has resulted in:
-- confirmation of management's estimates that over 10 MMbbls of
recoverable resources are available within the Saffron
structure;
-- an optimised subsurface target location for Saffron #2;
-- a revised well design to optimise assessment of each of the
contributing reservoir horizons; and
-- the definition and assessment of required technical
capabilities of available rigs, so as to ensure improved drilling
performance of Saffron #2.
On this basis, a drilling work program and budget for Saffron #2
has now been completed by BPC, with a view to commencement of
Saffron #2 drilling operations in Q1 2021. Key outputs are
summarised as follows:
-- the Saffron #2 well will be drilled to approximately 4,500
feet and be co-located with the Saffron #1 well (thus minimising
site preparation costs), but targeting a thicker measured section
of reservoir slightly down dip of and to the north-east of that
targeted by Saffron #1;
-- upon completion of the drilling campaign, it is anticipated
that Saffron #2 will be immediately completed as a Lower Cruse
production well;
-- BPC has decided to drill the Saffron #2 well on a 100% basis,
and will thus not be pursuing previous "drill for equity" type
arrangements that had been contemplated by Columbus - BPC's
analysis is that these arrangements represented unacceptable levels
of value leakage;
-- a preliminary well budget for Saffron #2 at approximately 30%
less than the delivered drilling cost of the Saffron #1 well has
been established, although there will be additional completion
costs necessary to deliver immediate sales revenues; and
-- Drilling plan and documentation for environmental approval
has been submitted to the Ministry of Energy and Energy Industries
(MEEI) in Trinidad and Tobago.
5. Suriname EWT project - progressing the potential for
near-term, low cost oil sales and cashflow
In relation to the Weg Naar Zee project in Suriname, since
August 2020 BPC has completed a geological review of the available
data, undertaken a new petrophysical interpretation, and prepared a
reservoir study to assess production from this previously produced
but inefficiently drained on-trend extension of the Tambaredjo
field onshore in Suriname. This work has:
-- confirmed the potential un-swept volumes, and thus estimates
for oil production from the licence;
-- confirmed that the selected location for the Extended Well
Test ("EWT") will assess approximately half of the largest known
oil pool (i.e. STOIIP of 10 MMstb) in the Weg Naar Zee block,
allowing for early development concepts of up to 16 vertical wells
or 5 horizontal wells to be considered in the success case;
-- assessed the need for a dedicated, new production well
(WNZ09.02) in order to optimise reservoir access to maximise
delivery potential from the EWT; and
-- defined the pumping, completion and production strategy for
the WNZ09.02 well considered to be best suited to ensuring a full
testing of the overall field potential.
As a result of these studies, BPC has prepared and submitted the
drilling program for approval to Staatsolie (the state-owned oil
company in Suriname and the Weg Naar Zee Production Sharing
Contract partner). At the same time, necessary environmental
studies have been submitted to NIMOS, the Suriname National
Institute of Environment and Development.
Once approved, BPC is planning for drilling of WNZ09.02 to occur
in Q1 2021, with a locally sourced rig, to a total depth of
approximately 1,100 ft, and producing the well immediately
thereafter. Any production from the WNZ09.02 well can be
immediately transported and sold to the local refinery, located
approximately 30 kilometres from the proposed well site.
6. South West Peninsula (SWP) Exploration - realising reserves
growth and longer-term production potential
In the course of due diligence of the Columbus assets, BPC
formed the view that there is considerable latent exploration
potential in Trinidad's South West Peninsula, with significant
untapped exploration potential of over 200 MMbbls of Prospective
Resources.
Initial technical work by BPC over the past three months has now
confirmed this view, and BPC has identified nine prospects each
estimated to have in excess of 10 MMbbls recoverable resources. BPC
considers that this represents a highly valuable opportunity set,
to which the Company believes it can apply its core exploration
expertise (for comparison, pre-drill the Saffron #1 well was
prognosed to contain 11 MMbbls of Prospective Resource).
In order to further define and high-grade this potential, BPC
has now awarded contracts to undertake re-processing of the
existing 3D seismic over the areas of interest in the SWP. The
first phase of this work is scheduled to be completed in January
2021 and will be used to determine up to three potential material
prospects for exploration drilling in H2 2021.
7. Competent Person's Report - independent assessment of portfolio-wide resource
Consistent with previous announcements, BPC has contracted an
international oil and gas engineering consulting firm, ERC
Equipoise Ltd, to undertake a detailed 3(rd) party, independent
Competent Person's Report, covering all assets in Trinidad and
Tobago, and Suriname. Work is progressing well, and the results are
expected during mid-November 2020.
The Company's previously communicated goal is to establish a net
2P reserve position of at least 1 MMbbls before the end of 2020.
Success in planned exploration drilling and development programs
(for example, with Saffron #2) would see further material growth in
reserves and resources through 2021.
8. Goudron EPSC
In recent months BPC has had various meetings with relevant
authorities in Trinidad and Tobago in relation to the timing for
the signing of the new Goudron EPSC. BPC has received assurances
that this will occur in the near future, and the Company will keep
the market advised of progress in this regard.
Upcoming Key Milestones
The volume of recent work undertaken by BPC in Trinidad and
Tobago and Suriname has laid the groundwork for significant
progress in all aspects of operations over the coming months. As a
result, the Company will be seeking to measure its ongoing progress
against a number of transparent milestone targets in the near
future, as follows:
-- Results of Competent Person's Report: during November 2020
-- Commence next phase of CO(2) EOR Pilot project: during November 2020
-- Receive approval for Saffron #2 drilling: December 2020 / January 2021
-- Receive approval for Suriname EWT program: December 2020 / January 2021
-- Achieve 500+ bopd production: by end of 2020
-- Saffron #2 spud: during Q1 2021
-- Suriname EWT well (WNZ09.02) spud: during Q1 2021
-- Goudron field waterflood project sanction: during H1 2021
The Company is committed to providing regular operations updates
for its business in Trinidad and Tobago and Suriname, and would
expect to provide a further such update early in Q1 2021. Separate
operations updates will be provided periodically in relation to
BPC's exploration projects in The Bahamas and Uruguay, as
appropriate.
Regulatory Statements
In accordance with the AIM Note for Mining and Oil & Gas
Companies, BPC discloses that Nathan Rayner , the Company's
Operations Director, is the qualified person who has reviewed the
technical information contained in this announcement. He is a
qualified Petroleum Engineer, a member of the Society of Petroleum
Engineers, and a member of the Institution of Engineers, Australia.
He has over 20 years' experience in the oil and gas industry.
Nathan Rayner consents to the inclusion of the information in the
form and context in which it appears.
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
For further information, please contact:
Bahamas Petroleum Company plc Tel: +44 (0) 1624
Simon Potter, Chief Executive Officer 647 882
Strand Hanson Limited - Nomad Tel: +44 (0) 20 7409
Rory Murphy / James Spinney / Jack Botros 3494
Shore Capital Stockbrokers Limited - Tel: +44 (0) 207 408
J oint Broker 4090
Jerry Keen / Toby Gibbs
Investec Bank Plc - J oint Broker Tel: +4 4 (0) 207
Chris Sim / Rahul Sharma 597 5970
CAMARCO Tel: +44 (0) 020 3757
Billy Clegg / James Crothers / Hugo Liddy 4980
Notes to editors
BPC is a Caribbean and Atlantic margin focused oil and gas
company, with a range of exploration, appraisal, development and
production assets and licences, located offshore in the waters of
The Bahamas and Uruguay, and onshore in Trinidad and Tobago, and
Suriname. BPC is currently on-track for drilling an initial
exploration well in The Bahamas, Perseverance #1, in late 2020 /
early 2021, with the well targeting recoverable P(50) prospective
oil resources of 0.77 billion barrels, with an upside of 1.44
billion barrels. In Trinidad and Tobago, BPC has five producing
fields, two appraisal / development projects and a prospective
exploration portfolio in the South West Peninsula. BPC's
exploration licence in Uruguay is highly prospective, with a
potential resource of 1 billion barrels of oil equivalent. In
Suriname, BPC has an onshore appraisal / development project.
BPC is listed on the AIM market of the London Stock Exchange. www.bpcplc.com
END
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