Volga Gas reports difficulties on Uzen #4 sidetrack drilling

Volga Gas has reported difficulties while drilling a sidetrack to its Uzen #4 oil well with the intention of accessing a potentially unproduced zone of the Aptian reservoir of the Uzen oil field.

"During the drilling of a deviated section from the existing vertical well mechanical difficulties were encountered," said the company, whose shares have plunged almost 8%.

"The drill bit and certain directional drilling tools supplied by Schlumberger became stuck in the well, as a result of a faulty pump interrupting drilling mud circulation," it added.

Volga added that various attempts have been made to release the stuck drill bit and to retrieve the directional drilling tools, but unfortunately these had proved unsuccessful.

Consequently, the company said, management have taken the decision to abandon any further attempts.

"Given the attractiveness of accessing incremental reserves in a side track well, Volga Gas will recommence drilling a sidetrack after appointing a new drilling contractor," it said.

Volga noted that it may incur costs of up to $2.0m, including compensation for replacement of the directional drilling tools belonging to Schlumberger.

"Volga Gas will seek to recover such costs from the drilling contractor which the Company considers to have been responsible for the problems.

"However, it may be prudent to make a provision for some or all of these costs in the 2016 Income Statement."

At about 10:58 GMT, shares in Volga Gas were down 7.69% to 48p.