Serica Energy PLC (AIM:SQZ) shares started the week on the back foot as the North Sea firm reported disappointing well results from the North Eigg exploration well.
The company, in a statement, said that whilst the North Eigg well encountered hydrocarbons, commercial quantities of oil have yet to be established.
At the well location the targeted reservoir sands were found to be thinner than prognosed in pre-drill analysis. Nevertheless, it added, some 16 feet of hydrocarbon-bearing sands were measured in the well and the company noted that it has confirmed the presence of hydrocarbons at a deeper depth than in the adjacent producing Rhum field.
The company next aims to determine whether drilling a sidetrack can “better evaluate the volumes of hydrocarbons in this new discovery”.
Whilst final costs cannot be confirmed until the drill rig is off-hire, the company said it is likely that net after-tax costs of the well will be around £13mln to Serica.
Separately, the company also gave an update on production which continues to rise steadily. At 28,977 barrels oil equivalent per day (boepd) for the month of November, it is up from 28,331 boepd for October and compares to 21,226 boepd in July.
The production increase comes as the company continues to benefit from increased investments in the Bruce, Keith and Rhum fields since their acquisition in 2018, Serica said.
Average production for the full year is expected to land between 26,000 and 28,000 boepd, meanwhile, Serica highlighted that around 85% of its production is gas.
It noted that commodity prices have remained strong, particularly gas, through the second half of 2022 – averaging 119.9p per therm for gas and US$92.10 per barrels for crude oil.