Commercial, operational & regulatory update

RNS Number : 0758O

Caspian Sunrise plc

05 February 2021

 

Caspian Sunrise PLC

("Caspian Sunrise" or the "Company")

Commercial, financial, operational & regulatory update

Introduction

The board is pleased to provide an update covering commercial / financial / operational and regulatory matters.

Commercial & financial update

In our previous announcement we identified three principal factors holding back the company's short term progress:

· Kazakh domestic oil price

· Assessed BNG historic costs

· Lack of deep well success

Domestic prices

Despite the Brent oil price rising to approximately $59 per barrel, more than 3 times the lowest price recorded in the past 12 months, the price at which we are required to sell our domestic production remains at a 12 month low of approximately $6 per barrel.

Recently domestic sales have ranged between 40-45% of total oil produced. Until the domestic price recovers selling to the domestic market will remain loss making.  We therefore continue to rely entirely on export sales for day to day cashflow and profitability.

In partial mitigation we are therefore pleased to report an increase both the overall production we are allowed to sell in February 2021 and an increase in the proportion of that may be sold by reference to export rather than domestic prices.

Assessed BNG historic costs

We continue to appeal against the BNG historic costs of $32 million to be paid quarterly over 10 years, which have been levied entirely against the MJF structure, despite that structure represent only 1% of the total BNG Contract Area.

We look forward to the case being considered by the Kazakh authorities later this month. In the meantime we prepare to pay the next quarterly payment.

Deep Well progress

As before, while some progress has been made with our deep wells, none are yet producing at commercial quantities.

Deep Well A8

Using pipes previously in use at Deep Well A5 further work was undertaken to clear the well to allow production from the interval between 4,343 meters and 4,499 meters. While this resulted in limited gas and oil shows they were not at commercial levels.

Our intention is to fracture and complete the well at the current 4,500 meter depth, which we expect will take two months. In the event this does not result in commercial quantities of oil we plan to drill a further 800 meters to the original Devonian target at a depth of 5,300 meters.

Deep Well A5

Work at Deep Well A5 to remove the stuck pipes paused while drill pipes were in use at Deep Well A8 but has recently resumed.  In the event the stuck pipes cannot be removed from Deep Well A5 we would look to drill a further side track from a depth of 4,500 meters.

Deep Wells A6 & 801

There has been no further progress at Deep Wells A6 and 801 since our previous announcement.

BNG Shallow wells

BNG Production volumes

Annual Production

Total production for 2020 was 545,667 barrels (2019: 506,620 barrels) an increase of 7.7% on 2019, at an average 1,491 bopd (2019: 1,388 bopd),. All of this production was from the BNG Contract Area with 523,640 barrels, representing approximately 96% of the total, from the MJF structure.

Current production

The MJF structure is currently producing at rates between 1,200 and 1,520 bopd, with average daily production for January 2021 of 1,384 bopd. No production is permitted at the South Yelemes structure until the licence upgrade is received.

New Well 151

Production from New Well 151 began in November 2020, with oil flowing naturally at rates of 70-80 bopd. Recently production rates have fallen to an average rate of 17 bopd. A pump is to be installed to boost production to take advantage of the increased production in February 2021 that is eligible for export markets.

New Well 141

Following increasing quantities of water being produced from the original interval a new interval has been perforated and the well has been restored to production at an average rate of approximately 30 bopd. We intend to install a pump at this well to boost production volumes.

Summary

Commercial, operational and regulatory progress has been limited of late.

Of the three factors identified as holding us back two, being the domestic price and the historic costs levied against the MJF structure, are outside our control. The third, achieving commercial production from our existing deep wells remains very much in our control.

Sales of oil to export markets continues to fund the Group's day to day activities.

Contacts:

Caspian Sunrise PLC

Clive Carver

Chairman    [phone]

WH Ireland, Nominated Adviser & Broker

James Joyce  [phone]

James Sinclair-Ford

Qualified person

Mr. Asslybek Umbetov, a member Association of Petroleum Engineers, has reviewed and approved the technical disclosures in this announcement.

This announcement has been posted to:

www.caspiansunrise.com/investors

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.

 

END

 

 

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