United Oil confirms rig contract for Abu Sennan

United Oil & Gas updated the market on the Abu Sennan licence in Egypt on Wednesday, where it holds a 22% working interest, including the signing of the rig contract for the ASH-3 well.

The AIM-traded firm said the EDC-50 rig had a history of successful drilling in the Western Desert, and had now been contracted for a drilling programme, starting with the ASH-3 development well, with low-cost rig-rates linked to oil prices.

It said the campaign would be funded from operating cash flow.

Subject to approvals, the rig was due to come on site before the end of the year, with drilling starting shortly afterwards.

It was expected that the ASH-3 well would take up to 60 days to drill and test.

The company said the ASH-3 well would target the producing Alam El Bueib (AEB) reservoirs in an area of the ASH field updip of the ASH-2 production well, which came onstream at the beginning of the year, and which to date had produced more than one million barrels.

It explained that the ASH-3 development would be the first well due to be drilled by the EDC-50 rig in the 2021 campaign.

United was expecting the second well in the drilling schedule to be an exploration well, targeting the Abu Roash reservoirs in the four-way dip-closed Prospect D structure in the north of the Abu Sennan licence, close to the producing Al Jahraa field.

The board described it as a “low-risk” well, located close to existing infrastructure, capable of being brought into production quickly.

Average production rates on the Abu Sennan licence for the second half of 2020 to 29 November came in at 2,370 barrels of oil equivalent per day net to United's working interest.

That was a 20% increase to the average first half production achieved, after United's entry to the licence at the end of February.

Average second half production was likely to exceed the previous guidance of 2,300 barrels of oil equivalent per day net, the board claimed.

It said production in the near term was due to benefit from the completion of the ASH-2 gas pipeline, expected to be brought onstream at the start of 2021.

When completed, the pipeline would “substantially increase” recovery rates and reduce the need to flare gas, improving the environmental performance of the licence.

The pipeline had the potential to add up to 1,000 barrels of oil equivalent per day of gross production.

In order to give greater visibility to shareholders, United would, from January, report production levels on a quarterly basis.

“Following an intense period of planning, we are delighted to be ready to re-commence drilling activities at the Abu Sennan licence, fully funded from our operating cash flow,” said chief executive officer Brian Larkin.

“We have worked closely with the operator, Kuwait Energy Egypt, over recent months to design a drilling campaign for 2021 and believe the scheduled wells can maintain the exceptional record of over 80% drilling success which has been achieved on the licence to date.”

Larkin said the Abu Sennan licence continued to perform strongly and deliver low-cost production growth.

“With over 35 mapped prospects on the licence and following on from the outstanding success of the ASH-2 and ES-5 wells where drilling outcomes significantly exceeded pre-drill expectations it offers excellent potential to deliver even greater returns for the licence partners.”

At 1442 GMT, shares in United Oil & Gas were up 2.72% at 2.72p.