Operational update

Caspian Sunrise plc

31 October 2023

 

Caspian Sunrise PLC ("Caspian Sunrise" or the "Group")

Operational update

Introduction

The Board of Caspian Sunrise is pleased to provide the following operational update on the Group's activities.

Impact of sanctions

Shareholders are reminded that neither the UK nor the EU has imposed sanctions on oil produced in Kazakhstan and transported via the Russian pipeline network. Nevertheless, the sanctions on Russia continue to have a significant impact on the Group's current position.

The disruption from the need to source drilling consumables from China continues to have an adverse impact on day to day operations. However, on a more positive note, the discount for oil produced in Kazakhstan and sold internationally via the Russian pipeline network has narrowed from the initial $35 per barrel to nearer $10 per barrel.

The two month lag in receiving payment for oil sold internationally and the associated costs and taxes attributable to international sales mean, even with Brent at $90 per barrel, we remain better off selling to the traditional domestic market and the newer domestic mini-refinery market.

With domestic prices at approximately $32 per barrel and domestic mini-refinery prices at approximately $34 per barrel we estimate that the headline Brent price would need to be approximately $100 per barrel to make a switch to international sales worthwhile.

BNG Overview

The plan at the two shallow structures on the BNG Contract area is to use a horizontal drilling approach on the older MJF wells to target oil in the Jurassic and on the older wells at the South Yelemes structure to target oil in the shallower Dolomite.

With the deeper structures the plan is to complete the current mandated drilling programme by drilling Well 803 and completing Well A7, before looking to bring as many as possible of the deep wells already drilled into production. After Well 803, it is unlikely any further deep wells will be drilled at the BNG Contract area.

BNG Production

Since our last update in the interim results released towards the end of September 2023, no additional wells have yet returned to production. Accordingly, production levels remain at approximately 2,000 bopd.

In particular there has been no contribution from the previously strongly performing MJF wells 142 and 141.

BNG Shallow structures

MJF

At Well 142 the side track is almost complete and ready for testing, which if successful would lead to the well contributing to increased production levels from mid-November.

Well 155 is due to be spudded before the end of November and drilled to a depth of approximately 3,000 meters with drilling expected to be completed by the end of  Q1 2024.

Well 141 is the next shallow well to be worked over with a horizontal side track with work expected to commence in December 2023.

South Yelemes

Wells 54, 805, 806 & 807 are to be worked over using a G20 rig starting in Q1 2024 at depths of approximately 2,000 meters targeting the previously unexplored Dolomite.

Deep structures

Yelemes Deep

At Well 802 the problem has been our inability to remove a stuck pipe to allow the well to be properly tested. Work at Well 802 has now stopped to allow the rig to be used to drill Well 803 the last of the deep wells in our BNG work programme, which is due to be spudded in mid-November and drilled to a planned depth of 3,950 meters. Drilling is expected to complete by March 2024.

We are in early stage discussions with specialist international drilling companies to have them bring Well 802 into production on a success basis in return for a revenue split on that well.

Airshagyl

At Deep Well A5 the plan remains to drill a new side track using one of the rigs recently in use at Block 8, with work starting in November.

Drilling at Deep Well A7, was paused at a depth of 2,000 meters. The plan is to use the G70 rig previously used to drill Deep Well A8 to finish drilling Well A7 to a maximum depth of 4,750 meters.

Other deep wells

At both deep Well A6 and Deep Well 801 we will consider the various options in light of the outcomes at the other Deep Wells referred to above.

Production expectations

Our hope and belief is that the work planned for the shallow structures will significantly improve production levels before the year end. We also believe the work planned at the deep structures provides the best chance for a transformative deep well success.

Block 8

Shareholders are reminded that the option to acquire Block 8 has been exercised with the timing of completion now largely dependent on the usual regulatory approvals.

Drilling at the two deep wells undertaken by CTS, the Group's wholly owned drilling subsidiary, has been completed with both now preparing for testing. Success with these wells, once the Block 8 acquisition has completed, could also significantly add to production levels.

Oil trading

We are pleased to report that the encouraging start to our oil trading activities continues.  While we remain cautious, limiting trading for the time being to oil produced on our own assets, we believe this new income stream will become increasingly important to the Group in the coming years.

Caspian Explorer

Preparations continue to make the Caspian Explorer ready for the summer 2024 ENI contract.

Additionally, we are in discussions with a number of potential partners concerning further contracts in 2024 and beyond.

3A Best          

There has been no change in the position at 3A Best where the licence has expired, other than KMG, the Kazakh state national oil & gas company, has acquired the adjacent and highly successful Dunga field.

Other projects

We are evaluating a number of other on shore and offshore opportunities both to acquire existing contract areas and to drill on contract areas belonging to others in return for earning an equity position. We are also evaluating opportunities in the minerals sector.

Dividend update

In June 2023 we suspended dividend payments following the failure to receive the $22.5 million payment due for the sale of 50% of the Caspian Explorer and the adverse impact of sanctions both on the ability to sell to international markets and the extra costs involved in sourcing consumables from China. At the time we undertook to review the position towards the end of the year.

While the discount for oil produced in Kazakhstan and delivered via the Russian pipeline network has narrowed, the continuing adverse impact of Russian sanctions plus the number of opportunities to increase longer term shareholder value by corporate actions leads the Board to consider the resumption of dividend payments in the near future to be unlikely.

Auditors

We are please to welcome PKF Littlejohn LLP as the Group's new auditors starting with the audit for the year ending 31 December 2023.

Corporate presentation

We draw shareholders attention to an updated corporate presentation, which may be found on the Caspian Sunrise website using the following link

 https://www.caspiansunrise.com/investors/circulars-documents/

Comment

Clive Carver, Chairman said

"We are getting to the point of discovering the outcome of sustained drilling campaigns at both the BNG and Block 8 Contract Areas.

Success in the shallow structures would significantly increase day to day production volumes.  Success in any of the deep structures would significantly impact the Group's longer term value.

We therefore look forward to updating shareholders with developments in the coming weeks and months."

Contacts:

Caspian Sunrise PLC

Clive Carver, Chairman                                                                [phone]

WH Ireland, Nominated Adviser & Broker

James Joyce                                                                            [phone]

James Bavister

Andrew de Andrade

Qualified person

Mr. Assylbek Umbetov, a member of the 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 to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

END