United Oil & Gas PLC ("UOG"), the growing oil and gas company with a portfolio of production, development, exploration and appraisal assets issues the following operations update ahead of its half year results on 28 September 2021.
H1 2021 production from the seven producing fields which make up the Abu Sennan licence net to the Company's working interest averaged 2,730 boepd in line with full-year guidance of 2,500 to 2,700 boepd.
The ASH field, which currently has three wells in production has performed exceptionally, with over 3 million barrels gross produced since it came on stream, representing c. 60% of oil production on the Abu Sennan licence since the start of 2020. Since early July the proportion of water to oil being produced ("water-cut") has increased on all three producing wells, particularly on ASH-2, where it has increased at a faster rate than expected. The increase in water cut has been accompanied by an associated drop in production from the ASH field.
The joint venture ("JV") partners have performed a number of operations to investigate options for controlling the water-cut and stabilising production, including looking at the effect of differing choke sizes, shutting in various perforated intervals, and running production logging tests. The JV partners are still in the early days of monitoring the performance of the wells since the interventions were performed and are continuing to consider other options that could help stabilise the decline.
The other six fields on the Abu Sennan licence are entirely unaffected by this and are producing in line with our expectations. As a result of the lower oil production from the ASH field, the Company has revised its full year guidance for the Abu Sennan licence from 2,500-2,700 to 2,100-2,300 boepd. Production from the Abu Sennan licence as at 4 September was 1,817 boepd net to the Company's working interest.
The JV partners are assessing the impact this may have on the ASH field reserves and resources, which represent 36% of the Abu Sennan licence oil reserves at end 2020. The annual independent reserves report will be completed at the end of December and will be published in our full year results.
Abu Sennan 2021 Drilling Program Update
As previously announced, the ASX-1X exploration well commenced drilling on 14 August 2021. The ASX-1X exploration well is located near the recent commercial discovery at ASD-1X. This well is making good progress against the planned schedule, with the primary reservoir targets expected to be reached within the next two weeks.
As a result of the successful drilling program in 2021 to date, JV partners now anticipate that a further development well will be added to the 2021 drilling programme. This is testament to the confidence the JV partners have in the asset and in the outlook for commodity prices. Drilling costs associated with drilling the development well will be funded from operating cashflow.
Brian Larkin CEO commented:
"The Abu Sennan licence has performed exceptionally since we acquired the asset. Whilst the increase in water cut at ASH-2 and the resulting impact on our production guidance is disappointing, we will continue to work with the JV partners to identify and implement the best long-term solution.
We are pleased to add a further well to our 2021 drilling program, in addition to the already drilling ASX-1X exploration well. The continued investment in the Abu Sennan licence by the JV partners speaks to the potential which exists within the concession and we look forward to updating shareholders as we receive further results.
Our low-cost production base continues to deliver positive operational cashflow, and this, combined with recently announced portfolio management initiatives, ensures that United remains in a strong position to execute our strategy"
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