www.aurelianoil.com
Aurelian Oil & Gas PLC, was founded in December 2002, and is focused on the re-emerging Central and Eastern European oil and gas markets, the oldest producing oil province in the world.
Current projects span the region from Poland to Bulgaria, with production in Romania, a deep appraisal well drilled on a large structure in Poland in March 2007 to be developed with a further horizontal well to be drilled in 2010, together with exciting exploration prospects including projects in four countries, Romania (4 blocks), Slovakia (3 blocks), Bulgaria (2 blocks) and Poland (14 blocks). Aurelian is the operator in all of these except Bulgaria.
Aurelian shares recover as investors look on the bright side after well delay
It has been a rollercoaster day for investors in Aurelian Oil & Gas (LON:AUL), whose shares plunged as much as 13 per cent in a frantic early session after the company revealed it had been hampered by delays and technical hitches in Poland.
However closer inspection of the statement appeared to steady investors’ nerves and by early afternoon the stock had clawed its way back to 69.75 pence – flat on the day.
In what was a fairly detailed statement, Aurelian said mechanical problems had hampered testing of the Trzek-2 multi fracced horizontal well and are likely to prevent a clean test of the well. It suspects that debris is lodged in the well bore.
Management is guiding that the initial flow rate is likely to be below the company’s guidance of 8 million cubic feet of gas per day (mmscf/d).
“Whilst this looks like a disappointing result it appears to be a mechanical rather than a reservoir issue and the company estimates that wells should still recover 16-28 billion cubic feet (bcf) as previously forecast,” City broker Oriel Securities said in a note to clients.
Earlier the company said that the first multi fracced horizontal well on the Siekierki tight gas project in Poland, Trzek-2, has begun its stabilised flow rate test, and drilling the second, Trzek-3, was running ahead of schedule.
What spooked investors, though, was the admission that the Trzek-2 flow rate test was delayed by two weeks due to mechanical problems during well clean-up. The gas inflow in six of the ten well bore sleeves is restricted, which the company believes is either caused by clean-up debris lodged in sleeve ports or sleeve ports being temporarily closed.
Aurelian said it is confident that the issue is not related to reservoir quality as tracers have confirmed that gas was recovered from all ten fracced zones during the initial production test. Furthermore, well bore logging has already shown positive reservoir characteristics along the full length of the horizontal section.
It is looking at undertaking remedial work should the problems persist after the end of the stabilised flow test, which is scheduled to runs for 2-3 weeks.
Even though the stabilised rate will in all likelihood be below Aurelian’s previous guidance of 8 mmscf/d, good reservoir quality indicators and expected lower production decline rates means it should still recover 16-28 bcf from this well and 346 bcf (net) from 20 wells across the full project.
As the trading session progressed, investors seemingly latched onto the more positive news contained in Aurelian’s update: namely that the second multi fracced horizontal well on Siekierki, Trzek-3, has been drilled much faster than its predecessor, The team is now setting casing at 3,699 metres prior to drilling into the Rotliegendes gas reservoir.
This point was reached in 57 days, while it took 90 with Trsek-2, which Aurelian ascribed to implementing lessons learned from the Trsek-2.
The vertical pilot hole and the horizontal section of Trzek-3 are expected to be completed by late May or early June 2011. Hydraulic fracturing operations will then follow, with stabilised flow test results expected by late June or early July. Trzek-3 is targeting a separate high in the Siekierki structure.
Chief executive Rowen Bainbridge said this morning: "Whilst the mechanical performance of the down hole and completion equipment on Trzek-2 has been disappointing, we believe that this can be corrected, will not recur in the future and will not impact the potential of our Siekierki tight gas project.
“The Trzek-3 well is performing better than we had hoped and we will have stabilised flow rates from both MFHWs by the end of June/beginning of July which will help us optimise the development of this key project,” he added.
The Siekierki tight gas project is hosted on the Poznan licences which is held by Aurelian’s 90 percent owned subsidiary Energia Zachόd. Avobone NV owns the other 10 percent of the subsidiary.
Aurelian also announced that the first well drilled in the Bieszczady block in Poland, Niebieszczany-1, has encountered an active oil and gas system in a zone above the primary targets. The well is targeting prospective resources of up to 100 million barrels of oil.
The well is currently drilling at 3,700 metres and is still to reach three primary oil targets located between 4,000 and 4,800 metres.
Bieszczady is operated and 51 percent held by Polskie Gornictwo Naftowe i Gazownictwo, Aurelian subsidiary Energia Bieszczady holds 25 percent, and Eurogas Polska holds the remainder.
Finally, Aurelian reported that Henryk Jesierski, the chief geologist at the Polish Ministry of Environment, confirmed at a conference held at the British Embassy in Warsaw in mid-March 2011 that Poland will not be blocking or restricting unconventional and shale gas development.
