United Oil & Gas PLC (AIM:UOG) (UOG) shares tumbled more than 20% lower in Thursday morning deals after a sudden drop-off in a new well resulted in downgraded expectations in Egypt.
The company, in a statement, told investors that production rates from the ASH-4 well, at the Abu Sennan licence, onshore Egypt, which was last week reported as producing around 1,685 barrels oil equivalent per day (boepd) - 371 boepd net to UOG - had declined sharply in subsequent days – suggesting that the well is connected to a smaller volume of oil than previously expected.
"Although the initial production from the ASH-4 development well has not performed as we had expected, it is contributing over 150 barrels to net production today and the data gathered has helped the joint venture partners increase our understanding of the subsurface and the ASH field, which is invaluable in planning future work programmes,” said UOG chief executive Brian Larkin in a statement.
The company noted that ASH-4 is located in a part of field that is seen to be more heavily faulted, and, that the well appears to have intersected a reservoir that is separated from the field’s other producing wells.
UOG, which owns a 22% non-operated interest in the project, said that its net production from Abu Sennan was now 1,027 boepd which is below expectations. The lower overall rate was due to the lower yield from ASH-4 and also the result of delays to a number of maintenance workovers to return production from existing wells. The company said this work is now expected to take place in “the coming weeks”.
The company has cut its production guidance for 2022, which is now set at 1,300 to 1,325 boepd down from 1,450 to 1,500 boepd previously.
It added the caveat that guidance does not include any contributions from well workovers which could yet add volumes before the year’s end. These are due in ‘late 2022’ and could add 175 boepd once completed.
In London, UOG shares were down 22.7% in morning trade, changing hands at 1.53p.