LONDON (ShareCast) - (ShareCast News) - Central Asian oil and gas company Caspian Sunrise updated the market with news of the extension of its licence at its flagship BNG Contract Area on Friday.
The AIM-traded firm has a 99% interest in the BNG Contract Area, which is located in the west of Kazakhstan, 40 kilometers southeast of Tengiz, on the edge of the Mangistau Oblast.

As it previously announced, the licence at the BNG Contract Area was due for renewal in June 2018, when it was expected Caspian Sunrise would apply for a 29-year full production licence to cover the whole BNG Contract Area.

It said the principal benefit from moving to a full production licence would be the ability to sell the majority of oil produced based on world prices, rather than the domestic prices permitted under an appraisal licence which were currently between $16 and $20 per barrel.

"A drawback is that a condition of such a licence upgrade may have been the need to curtail some of the planned exploration and development activities especially at our deeper prospects," the Caspian Sunrise board explained in its statement.

"This stems predominantly from the need to have explored regions and structures during the appraisal period of a licence to allow unrestricted further development during the full production phase."

On Friday, however, the company confirmed it had reached early agreement with the Kazakh regulatory authorities to extend the whole of its licence at BNG on an appraisal basis for a further six years, effective from June 2018, with the opportunity from that date to apply to convert individual structures to full production status at the company's timing.

It said the ability to elect the timing of when to apply for different structures to move to full production status would allow the company to manage the move from appraisal to production on a structure by structure basis rather than for the Contract Area as a whole.

"This marks a very positive outcome as it should be possible for instance for the company to operate its highly successful and well developed MJF structure on a full production licence basis while continuing to explore other shallow and deep prospects."

For example, the board said the shallow MJF Structure already had five producing wells with a sixth well nearing its total depth.

In comparison, the potential shallow New Structure had only one well drilled and to date that had not shown it could produce at commercial rates, but given more time and work it may do so.

"Of greatest importance however is the benefit for the deeper prospects to be explored more fully before moving to full production status," the board explained.

"For example the Deep Airshagyl Structure, with A5 & A6 already drilled and A8 due for spudding in Q4 2017, and where we have more information on likely structure boundaries, is likely to be suitable for a move to full production status before the deep Yelemes Structure on which only Deep Well 801 has been drilled to date with Deep Well 802 is planned for H1 2018."

Another consequence of this better phasing, according to the board, would be that if the company chose to, even its deep drilling could be funded by the pre-sale of oil from the BNG Contract Area making any large scale equity fund-raising entirely discretionary.

"The flexibility afforded to the company by the early agreement with the Kazakh authorities on the extension of the licence for the BNG Contract Area should materially improve the returns to current shareholders as the funding of our near term deep wells should now be within the company's control from the pre-sales of oil without the need for dilutive equity issues," said Caspian Sunrise executive chairman Clive Carver.

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