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Bahamas Petroleum Co - Operational Update: Trinidad & Tobago and Suriname

RNS Number : 0687E
Bahamas Petroleum Company PLC
03 November 2020
 

3 November 2020

Bahamas Petroleum Company plc

("BPC" or the "Company")

Operational Update: Trinidad and Tobago, and Suriname

 

BPC, the Caribbean and Atlantic margin focused oil and gas company, with production, appraisal, development and exploration assets across the region, is pleased to provide the following operational update in relation to its assets in Trinidad and Tobago, and Suriname.

 

Highlights

TRINIDAD AND TOBAGO

·    Substantial increase in field activities, including an additional rig being deployed into the field to further expand workover capability/capacity

·    Production decline arrested and early signs of sustainable overall production increase consistent with strategy and plan; target baseline production rate of 500 bopd by the end of 2020, as previously announced, remains unchanged

·    Plans for enhanced oil recovery (EOR) projects submitted for approval to Trinidad and Tobago regulatory authorities; CO2 injection project production well work program approved and workover commencing imminently

·    Work program defined to appraise Saffron discovery, including development of the drill plan for Saffron #2, target spud date in Q1 2021

·    Multiple prospects identified across the South West Peninsula (SWP) portfolio that are estimated by management to each have +10 MMbbls of recoverable resource potential (i.e. each equivalent in size to Saffron)

SURINAME

·    Drill plan, work program and environmental studies for the Extended Well Test (EWT) submitted for approval to Suriname regulatory authorities; target spud date for the first well in Q1 2021

ACROSS THE PORTFOLIO

·    Rapid progress to the commencement of drilling the Perseverance #1 well in The Bahamas before the end of this year

·    On track to deliver Competent Person's Report (CPR) in mid-November 2020, covering all the Company's assets in Trinidad and Tobago and Suriname

 

Commenting, Simon Potter, CEO of BPC, said:

"BPC combined its assets with those of Columbus in August 2020 to create a full cycle exploration, development and production business, with a balanced portfolio of assets representing the full maturity and risk/reward spectrum of our industry. Since assuming management of Columbus' assets, we have sought to leverage our proven operating experience and skills, in pursuit of a simple short-term aim: to deliver cash flow from operations in Trinidad sufficient to cover the local operating costs, and thereafter to ultimately cover the overheads of the enlarged group as we build to material, profitable production.

In the relatively short period of time since assuming operational control, we have been extremely busy in taking the first steps to realising performance improvements in support of this aim. We have moved quickly to increase activity in the producing fields to a level not seen for a number of years, defined the drilling program for Saffron #2, and pulled the levers that we believe will deliver an increase to each of production, cashflow, and the existing resource and reserve base. It is an ongoing process, but we are pleased to be seeing the first green shoots of operational improvement, with arrested production decline and, albeit modest, production growth. Collectively, this gives us great optimism in being able to deliver on our value-creating strategy for the future.

In parallel, we continue to make rapid progress to the commencement of drilling the Perseverance #1 well in The Bahamas before the end of this year. A separate and distinct operational management and execution group remains entirely focussed on the successful delivery of this core company objective."

 

Operational Update

BPC assumed full ownership of the assets of Columbus Energy Resources Plc ("Columbus") in Trinidad and Tobago, and Suriname in early August 2020, less than 3 months ago. In the period since, management has completed a full review of all aspects of these operations, which has confirmed BPC's view that the assets present an extensive range of accessible opportunities to drive increases to production from the existing fields and facilities, as well as multiple options to quickly appraise and develop assets for new production and explore for additional resources. As a first step, BPC has focused on short-term actions designed to arrest production decline, and implement actions that lay the groundwork for growing production sustainably into the future. In this context, significant operational achievements in the period are summarised as follows:

1.   Operational Review Completed - increasing organisational efficiency

Commensurate with the underlying asset review, a reorganisation of the Trinidad staff base into more functionally focussed teams has been completed. This reorganisation has been complemented with successful placement of experienced personnel into key roles focussed on production oversight and measurement, operations supervision and rig management, with the intention of bringing new technologies, revised well designs and use of improved materials to bear. The revised organisational set up and high grading of personnel more effectively prioritises deployment of personnel resources to the best projects, rather than simply allocating resources between assets. This ensures the optimal range of field activities, assuring the delivery of exploration, appraisal and development plans, and contributing to efforts to reduce the cost per barrel in operations.

2.   Improved Management of Existing Well Stock - arresting production decline and approaching breakeven

The asset base in Trinidad includes five producing fields with a total of around 250 historical wells, of which about half are presently considered capable of ongoing production. At the time of BPC assuming management responsibility about 80 wells were on production, and the well workover frequency rate had fallen from more than 180 per annum (in 2018), to an average rate of around 50 per annum, with most well work planning being a function of repair rather than proactive maintenance and managed intervention.

As a consequence, prior to BPC assuming operational control, production had been exhibiting sustained decline over an extended period of time. For example, at the start of 2019 average daily production capacity was approximately 600 bopd, but by August 2020 nearly 200 bopd of that production capacity had been lost, and activity levels were such that BPC estimates production would have fallen below 400 bopd before the end of 2020, absent intervention. Over and above this persistent decline, the production rate on a day-to-day basis was highly variable and inconsistent.

Improved management of existing well stock is fundamental to success in managing mature fields and achieving sustainable, reliable production. This involves not only maximising the total number of wells producing at any one time, but also working to ensure that producing wells remain on stream for longer. The BPC management team has considerable experience in proactively managing mature operations in this way, and has now implemented active individual well data tracking and daily monitoring/measuring of performance as a key operational management practice within the Trinidad and Tobago business. This data set feeds into establishing a fundamental understanding of which are key wells, leading to proactive interventions, improved completion design and ultimately increased overall rates of production.

Consistent with BPC's immediate focus on improving management of the existing well stock, the following has been achieved since August 2020:

·    the total number of wells on production has increased by 6%, as previously producing wells have been brought back onto production;

·    new completion designs and materials have been installed on more than 20% of the wells worked over / recompleted to date;

·    the frequency of well workovers has increased, with BPC now on-track to achieve in excess of 180 workovers by end of 2020 (which is more than 3 times the number achieved during 2019); and

·    approximately 50 hitherto dormant wells have been inspected and flow-tested to assess suitability for being reactivated back into production.

As a result of the above, as at the end of October 2020, production from existing wells is now consistently averaging around 435 bopd. In absolute terms this represents an encouraging improvement compared to that which prevailed immediately before BPC assumed control of the assets. More significantly, this represents a notable uplift (about 10%) from the decline trajectory embedded in historical production numbers at the time of BPC's management assuming control. In other words, as a first phase, BPC believes that the intense work program initiated since August 2020 has seen the historical production decline arrested.

Further, the production currently being achieved is considerably less variable on a day-to-day basis than was evident previously. BPC considers this an important achievement, as it affords a much more reliable base upon which to plan, schedule and prioritise new work, and provides greater ability to focus on enhancement rather than repair, which is a key underpin to the overall strategy for production growth in Trinidad and Tobago.

In summary, therefore, BPC considers that work undertaken since August 2020 has achieved a first significant step of arresting production decline, and is providing early validation of BPC's view that once decline is arrested, the Company will be able to stabilise, maintain and grow production in Trinidad and Tobago from the base well stock. Accordingly, BPC's target of a baseline production rate of 500 bopd by the end of 2020, as previously announced, remains unchanged.

BPC notes, as previously advised, that at this targeted level of production, overall operating costs in Trinidad and Tobago are approximately US$20 per barrel, and at a US$40 per barrel oil price this would result in the Trinidad and Tobago business generating sufficient cashflow to cover the costs of its own operations. In the event of production increasing beyond this targeted level, and/or in the event of the oil price being greater than $40 per barrel, operations in Trinidad and Tobago would likely be in a position to generate surplus cash that can be deployed to other activities across BPC's business.

3.   Third Workover Rig Contracted - focussing on reservoir access and connectivity

BPC currently owns and operates 2 workover rigs in Trinidad and Tobago, but given the focus on increasing the active well stock and other remedial field work, BPC has now contracted a third workover rig (Summit Rig #6), which will soon commence work on at least 11 new incremental production projects. These new projects have been prioritised towards work that is expected to increase reservoir access and connectivity through the addition of new perforations and/or cleaning of existing perforations. This is expected to allow access to previously un-swept oil, translating directly into sustainable increased production levels from existing wells (rather than simply effecting repairs that maintain the status quo).

3.   Enhanced Oil Recovery Projects - focussing on long-term reservoir pressure improvements

BPC's various Enhanced Oil Recovery ("EOR") projects have been progressed in the past three months, consistent with the overall strategy of increasing production on a sustainable basis. In particular:

·    The CO2 EOR Pilot project at the Inniss-Trinity block is now ready to enter Phase 3 of the pilot program. Final approvals necessary in order to produce oil from the AT-5X well have been obtained from all applicable regulatory authorities in Trinidad and Tobago, and it is expected that this activity will commence imminently, with a view to monitoring production and the potential production gains resulting from the CO2 injection; and

·    At the Goudron field, BPC has reviewed and prepared the technical and environmental reports necessary to begin the planned waterflood project. Once approved, the project plan includes up to twelve phases of injection across the field to improve the reservoir pressure, and subsequently measuring the impact on oil production. 

4.   Saffron #2 - progressing an opportunity for potentially rapid and material increase to production and cashflow

BPC has undertaken a comprehensive review of the drilling campaign that was undertaken for the Saffron #1 well (a discovery of undrained light oil in the Lower Cruse reservoir formation) by Columbus in early 2020. This has included a review of the well design, its operational execution, and a reassessment of the technical results from a geological and reservoir perspective. This work identified a number of operational issues with the Saffron #1 drilling campaign which BPC believes can be managed / optimised in future activities so as to improve overall asset performance.

More significantly, this work has also confirmed the potential for a material development of the Lower Cruse formation, as well as further draining of the Middle Cruse, across the mapped Saffron field, and has resulted in:

·    confirmation of management's estimates that over 10 MMbbls of recoverable resources are available within the Saffron structure;

·    an optimised subsurface target location for Saffron #2;

·    a revised well design to optimise assessment of each of the contributing reservoir horizons; and

·    the definition and assessment of required technical capabilities of available rigs, so as to ensure improved drilling performance of Saffron #2.

On this basis, a drilling work program and budget for Saffron #2 has now been completed by BPC, with a view to commencement of Saffron #2 drilling operations in Q1 2021. Key outputs are summarised as follows:

·    the Saffron #2 well will be drilled to approximately 4,500 feet and be co-located with the Saffron #1 well (thus minimising site preparation costs), but targeting a thicker measured section of reservoir slightly down dip of and to the north-east of that targeted by Saffron #1;

·    upon completion of the drilling campaign, it is anticipated that Saffron #2 will be immediately completed as a Lower Cruse production well;

·    BPC has decided to drill the Saffron #2 well on a 100% basis, and will thus not be pursuing previous "drill for equity" type arrangements that had been contemplated by Columbus - BPC's analysis is that these arrangements represented unacceptable levels of value leakage;

·    a preliminary well budget for Saffron #2 at approximately 30% less than the delivered drilling cost of the Saffron #1 well has been established, although there will be additional completion costs necessary to deliver immediate sales revenues; and

·    Drilling plan and documentation for environmental approval has been submitted to the Ministry of Energy and Energy Industries (MEEI) in Trinidad and Tobago.

5.   Suriname EWT project - progressing the potential for near-term, low cost oil sales and cashflow

In relation to the Weg Naar Zee project in Suriname, since August 2020 BPC has completed a geological review of the available data, undertaken a new petrophysical interpretation, and prepared a reservoir study to assess production from this previously produced but inefficiently drained on-trend extension of the Tambaredjo field onshore in Suriname. This work has:

·    confirmed the potential un-swept volumes, and thus estimates for oil production from the licence;

·    confirmed that the selected location for the Extended Well Test ("EWT") will assess approximately half of the largest known oil pool (i.e. STOIIP of 10 MMstb) in the Weg Naar Zee block, allowing for early development concepts of up to 16 vertical wells or 5 horizontal wells to be considered in the success case;

·    assessed the need for a dedicated, new production well (WNZ09.02) in order to optimise reservoir access to maximise delivery potential from the EWT; and

·    defined the pumping, completion and production strategy for the WNZ09.02 well considered to be best suited to ensuring a full testing of the overall field potential.

As a result of these studies, BPC has prepared and submitted the drilling program for approval to Staatsolie (the state-owned oil company in Suriname and the Weg Naar Zee Production Sharing Contract partner). At the same time, necessary environmental studies have been submitted to NIMOS, the Suriname National Institute of Environment and Development.

Once approved, BPC is planning for drilling of WNZ09.02 to occur in Q1 2021, with a locally sourced rig, to a total depth of approximately 1,100 ft, and producing the well immediately thereafter. Any production from the WNZ09.02 well can be immediately transported and sold to the local refinery, located approximately 30 kilometres from the proposed well site.

6.   South West Peninsula (SWP) Exploration - realising reserves growth and longer-term production potential

In the course of due diligence of the Columbus assets, BPC formed the view that there is considerable latent exploration potential in Trinidad's South West Peninsula, with significant untapped exploration potential of over 200 MMbbls of Prospective Resources.

Initial technical work by BPC over the past three months has now confirmed this view, and BPC has identified nine prospects each estimated to have in excess of 10 MMbbls recoverable resources. BPC considers that this represents a highly valuable opportunity set, to which the Company believes it can apply its core exploration expertise (for comparison, pre-drill the Saffron #1 well was prognosed to contain 11 MMbbls of Prospective Resource).

In order to further define and high-grade this potential, BPC has now awarded contracts to undertake re-processing of the existing 3D seismic over the areas of interest in the SWP. The first phase of this work is scheduled to be completed in January 2021 and will be used to determine up to three potential material prospects for exploration drilling in H2 2021.

7.   Competent Person's Report - independent assessment of portfolio-wide resource

Consistent with previous announcements, BPC has contracted an international oil and gas engineering consulting firm, ERC Equipoise Ltd, to undertake a detailed 3rd party, independent Competent Person's Report, covering all assets in Trinidad and Tobago, and Suriname. Work is progressing well, and the results are expected during mid-November 2020.

The Company's previously communicated goal is to establish a net 2P reserve position of at least 1 MMbbls before the end of 2020. Success in planned exploration drilling and development programs (for example, with Saffron #2) would see further material growth in reserves and resources through 2021.

8.   Goudron EPSC

In recent months BPC has had various meetings with relevant authorities in Trinidad and Tobago in relation to the timing for the signing of the new Goudron EPSC. BPC has received assurances that this will occur in the near future, and the Company will keep the market advised of progress in this regard.

 

Upcoming Key Milestones

The volume of recent work undertaken by BPC in Trinidad and Tobago and Suriname has laid the groundwork for significant progress in all aspects of operations over the coming months. As a result, the Company will be seeking to measure its ongoing progress against a number of transparent milestone targets in the near future, as follows:

·    Results of Competent Person's Report: during November 2020

·    Commence next phase of CO2 EOR Pilot project: during November 2020

·    Receive approval for Saffron #2 drilling: December 2020 / January 2021

·    Receive approval for Suriname EWT program: December 2020 / January 2021

·    Achieve 500+ bopd production: by end of 2020

·    Saffron #2 spud: during Q1 2021

·    Suriname EWT well (WNZ09.02) spud: during Q1 2021

·    Goudron field waterflood project sanction: during H1 2021

The Company is committed to providing regular operations updates for its business in Trinidad and Tobago and Suriname, and would expect to provide a further such update early in Q1 2021. Separate operations updates will be provided periodically in relation to BPC's exploration projects in The Bahamas and Uruguay, as appropriate.

 

Regulatory Statements

In accordance with the AIM Note for Mining and Oil & Gas Companies, BPC discloses that Nathan Rayner, the Company's Operations Director, is the qualified person who has reviewed the technical information contained in this announcement. He is a qualified Petroleum Engineer, a member of the Society of Petroleum Engineers, and a member of the Institution of Engineers, Australia. He has over 20 years' experience in the oil and gas industry. Nathan Rayner consents to the inclusion of the information in the form and context in which it appears.

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

 

For further information, please contact:

 

Bahamas Petroleum Company plc

Simon Potter, Chief Executive Officer

Tel: +44 (0) 1624 647 882

Strand Hanson Limited - Nomad

Rory Murphy / James Spinney / Jack Botros

Tel: +44 (0) 20 7409 3494

Shore Capital Stockbrokers Limited - Joint Broker

Jerry Keen / Toby Gibbs

 

Tel: +44 (0) 207 408 4090

Investec Bank Plc - Joint Broker

Chris Sim / Rahul Sharma

Tel: +44 (0) 207 597 5970

CAMARCO

Billy Clegg / James Crothers / Hugo Liddy

Tel: +44 (0) 020 3757 4980

 

Notes to editors

 

BPC is a Caribbean and Atlantic margin focused oil and gas company, with a range of exploration, appraisal, development and production assets and licences, located offshore in the waters of The Bahamas and Uruguay, and onshore in Trinidad and Tobago, and Suriname. BPC is currently on-track for drilling an initial exploration well in The Bahamas, Perseverance #1, in late 2020 / early 2021, with the well targeting recoverable P50 prospective oil resources of 0.77 billion barrels, with an upside of 1.44 billion barrels. In Trinidad and Tobago, BPC has five producing fields, two appraisal / development projects and a prospective exploration portfolio in the South West Peninsula. BPC's exploration licence in Uruguay is highly prospective, with a potential resource of 1 billion barrels of oil equivalent. In Suriname, BPC has an onshore appraisal / development project.

 

BPC is listed on the AIM market of the London Stock Exchange.  www.bpcplc.com

  

END

 

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