Beacon Energy PLC (AIM:BCE) shares fell close to 20% in Thursday’s early deals after a production update revealed that the Schwarzbach-2(2) well, at the Erfelden field in Germany, was yielding only 40 barrels of oil per day.
The company said the low rate indicated that the reservoir near the wellbore has been invaded with drilling fluids which are restricting flow; it described this as “not uncommon in situations where hole stability issues have occurred during drilling”.
Well clean-up continues at a slow pace, it added, and said even at such low rates production is commercial with field revenues exceeding field operating costs.
Looking ahead, the company said it will undertake industry-standard well stimulation in the fourth week of January in order to improve production, at an estimated cost of less than €500,000.
It added that “in the absence of an invasion zone which restricts flowrate, the SCHB 2(2.) well could achieve production in the region of 900 bopd”, and if that was achieved it would expect the well to deliver US$1.5 million of cash flow per month.
"After an extended flow test to allow the well to clean-up and provide us with the critical data to inform next steps, the SCHB-2(2.) well is now in commercial production but at lower flowrates than expected,” chief executive Larry Bottomley said in a statement.
He added: "The principal implication for the lower than expected flowrate is the delay to the development of the Erfelden field … The challenges currently being experienced do not alter our belief in the ultimate production potential from this well.”
Bottomley said Beacon is fully focused on establishing optimal production as quickly as possible.
"We look forward to providing an update on the work-over programme in due course,” he added.
In London, Beacon shares were down 17%, changing hands at 0.085p each.