Challenger Energy to focus on existing wells for rest of 2022

Challenger Energy updated the market on the work programme for its assets in Trinidad and Tobago and Suriname on Tuesday, confirming that its focus in Trinidad and Tobago was to deliver near-term production growth to both offset natural reservoir decline and to reach average production of 550 to 600 barrels of oil per day by the end of 2022.

The AIM-traded firm said achieving that would enable it as a whole to operate on a cash flow positive basis, assuming prevailing oil prices.

In support of that, its work programme for the rest of 2022 would consist of a “very specific, fully-funded” range of activities across its Trinidadian asset portfolio.

That would include recompleting 10 to 15 existing wells, to open up different reservoir units, halt or reduce water production, and to inhibit sand influx, and thus increase oil production from the recompleted wells.

Recompletions were planned in each of the Goudron, Inniss-Trinity and Bonasse fields, with work expected to be completed by October.

The expanded programme of recompletions followed the successful recompletion programme undertaken in March and April.

Challenger said the programme would also see the reactivation of 10 to 12 wells currently not in production, in both the Goudron and Inniss-Trinity fields.

That programme of work was also expected to be completed by October.

An “extensive, continuous” in-house swabbing programme would also take place across all of the company's fields.

Challenger said a “considerable number” of wells across all fields had seen fluid levels rise in the wellbore to the extent they no longer flowed, with swabbing being described as a low-cost means of reducing or removing the fluid levels, allowing the well to produce again.

Finally, the work would include a single-pattern water injection enhanced oil recovery programme at the Goudron field, which was planned to start in November.

Additionally, ongoing investment was planned in essential equipment purchases, including a swabbing rig, vacuum tankers and other production-related items, as well as upgrades and refurbishments to equipment and facilities across the portfolio.

The board said the investment was expected to improve operational efficiency, increase facilities uptime, reduce individual wells downtime, and increase workover rigs productivity, resulting in production delivery and cash flow improvements as well as cost savings.

Sohan Ojah-Maharaj, as both Trinidad country manager and an experienced petroleum engineer, led a “comprehensive review” of the well stock, reservoir performance and models, and field management structure in formulating the work programme, and would now lead delivery of the work for the rest of 2022 and into 2023, the board said.

The company noted the planned work programme for the rest of 2022 represented a decision to undertake a diverse range of production-enhancing activities and gain associated information from those activities before moving to new well drilling.

It said it had made that decision because, as compared to new well drilling, the planned activities were lower-risk, would spread risk across multiple wells and fields, were expected to provide a more rapid production response, and were more cost effective overall than new well drilling.

In support of a drilling program in 2023, Challenger said it was evaluating up to nine potential new well opportunities across the Trinidadian asset portfolio, offering the possibility of “significant production uplifts” consistent with its longer-term production goal of 1,000 barrels per day.

During the remainder of 2022, the firm said it would also be evaluating an appropriate funding strategy for new wells, with a view to reducing the capital burden and risk to the company of drilling activities.

That would include risk-sharing opportunities with contractors and partners.

In Suriname, meanwhile, Challenger said it had applied for an extension of the initial period for undertaking an extended well test in the Weg Naar Zee field.

The extension request recognised delays arising from the pandemic, and would facilitate a technical reassessment of the drilling strategy for the project, in particular to consider the applicability of horizontal drilling as well as a steam injection-enhanced oil recovery programme, both as a means of improving recoverability and enhancing project economics.

On successful application, Challenger said it expected drilling would now take place in 2023, and at the same time it said it was also considering potential partnership opportunities for the licence.

“Over the past six months, we have worked hard to redefine Challenger Energy's operations around a simple strategic focus - to build cash flow from our production base in Trinidad, and to reach a point where as a group we operate on a cash flow positive basis,” said chief executive officer Eytan Uliel.

“In the process we have re-evaluated every single aspect of the Trinidad operations, to see how best we can clear legacy items, drive efficiencies, and deploy precious capital in the most effective, production-growth oriented manner.

“The work programme for the balance of 2022 reflects the outcome of this work.”

In particular, Uliel said across its five producing fields it had a “significant inventory” of wells, with the focus of the work planned for 2022 on working that existing well stock through a range of actions, as well as on upgrading production-critical field infrastructure.

“We expect this work to deliver the near-term production growth we are targeting in the surest, lowest risk way possible and, if successful, provide a solid basis on which to approach the execution and funding of a drilling campaign in 2023.”

At 1355 BST, shares in Challenger Energy Group were down 16.67% at 0.1p.

Reporting by Josh White at Sharecast.com.