Caspian Sunrise progress remains 'limited'
By Josh White
Date: Friday 05 Feb 2021
(Sharecast News) - Caspian Sunrise updated the market on its progress on Friday, having previously identified three factors holding back its short-term progress, being the Kazakh domestic oil price, assessed historic costs for BNG, and the lack of deep-well success.
The AIM-traded firm said that, despite the Brent oil price rising to approximately $59 per barrel, more than three times the lowest price recorded in the last year, the price at which it was required to sell its domestic production remained at a 12-month low of approximately $6 per barrel in Kazakhstan.
Recently, domestic sales had ranged between 40% and 45% of total oil produced, and until the domestic price recovered, selling to the domestic market would remain loss making.
The board said it thus continued to rely entirely on export sales for day-to-day cash flow and profitability.
"In partial mitigation, we are pleased to report an increase in both the overall production we are allowed to sell in February and an increase in the proportion of that may be sold by reference to export rather than domestic prices," the board said in its statement.
Looking at the assessed historic costs for BNG, Caspian Sunrise said it was continuing to appeal against the costs of $32m to be paid quarterly over 10 years, which had been levied entirely against the MJF structure, despite that structure representing just 1% of the total BNG contract area.
"We look forward to the case being considered by the Kazakh authorities later this month," the board said.
"In the meantime we prepare to pay the next quarterly payment."
On its deep well progress, the company said that as previously, while some progress had been made with its deep wells, none were yet producing at commercial quantities.
At seep 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 and 4,499 meters.
While that 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," Caspian Sunrise explained.
"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.
On deep well A5, the firm said work to remove the stuck pipes was paused while pipes were in use at deep well A8, but had recently resumed.
In the event the stuck pipes could not be removed from deep well A5, the company said it would look to drill a further side track from a depth of 4,500 meters.
At deep wells A6 and 801, Caspian Sunrise said there had been no further progress since its previous announcement.
Looking at the BNG shallow wells, the company said total production for 2020 was 545,667 barrels, up 7.7% on 2019, at an average of 1,491 barrels of oil per day.
All of that production was from the BNG contract area with 523,640 barrels, representing around 96% of the total, from the MJF structure.
The MJF structure was currently producing at rates between 1,200 and 1,520 barrels of oil per day, the board said, with average daily production for January of 1,384 barrels per day.
"No production is permitted at the South Yelemes structure until the licence upgrade is received," the directors confirmed.
Production from new well 151 began in November, with oil flowing naturally at rates of 70 to 80 barrels of oil per day.
Recently, production rates had fallen to an average rate of 17 barrels per day.
"A pump is to be installed to boost production to take advantage of the increased production in February that is eligible for export markets."
Finally, at new well 142, following increasing quantities of water being produced from the original interval, a new interval was perforated and the well restored to production at an average rate of around 30 barrels of oil per day.
The company said it intended to install a pump at that well to boost production volumes.
"Commercial, operational and regulatory progress has been limited of late," the Caspian Sunrise board said.
"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."
It said the third - achieving commercial production from its existing deep wells - remained "very much" in the company's control.
"Sales of oil to export markets continues to fund the group's day to day activities."
At 1-18 GMT, shares in Caspian Sunrise were down 18.99% at 1.6p.
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