Challenger selling some oil from Saffron-2 well

The AIM-traded firm said produced oil was already being sold, and was generating immediate revenues for the company.

It said that, to maximise near-term production income, additional clean-up, testing, and optimisation of producing zones was underway, with the Upper Cruse reservoir units still to be perforated and produced.

The Lower Cruse reservoir units exhibited good pressure and produced high-quality oil of 480 API, but testing of those zones was halted due to the impact of mobile shales on the well bore.

Challenger said those lower zones were isolated from the currently-producing horizons, capable of being re-entered for future remedial actions in support of production.

Well data and the projection of aggregated well performance was being used to reassess overall Saffron field resources and economics, with work underway to determine the optimal forward plan for development of the Saffron project as a whole.

“The Saffron-2 appraisal well was successfully drilled and completed in early July 2021 - Challenger Energy's first operated drilling onshore Trinidad,” said chief executive officer Eytan Uliel.

“We have since perforated various reservoir horizons and run production tests.

“Pleasingly, testing in the Middle Cruse has resulted in an economic level of production thus far being achieved, and we are working to increase production further.”

Uliel confirmed the company was already selling the oil being produced, so for the immediate future, the plan is to maximise production revenues from those Middle Cruse units, as well as bringing on additional production from the as-yet-unperforated Upper Cruse units.

“Production tests have also proved the ability to flow high-quality hydrocarbons from the Lower Cruse reservoir at Saffron, but we did not achieve sustained production from these zones due to technical and mechanical issues encountered during those tests.

“That said, the Saffron project is in a tectonically active province, so challenges are to be expected, and each well builds on the learning from the previous wells.

“The key point is we have shown that there are moveable hydrocarbons in the Lower Cruse, and we believe that issues encountered can be addressed, such that the Lower Cruse can ultimately contribute meaningfully to production.”

Challenger had preserved the ability to re-enter and produce the lower zones of Saffron-2 in the future, Eytan Uliel said, and was incorporating the knowledge gained into the design of future Saffron wells.

“Focus now turns to integrating what we have learned from this well, to updating our resource estimate accordingly, and to defining the best way forward for the project as a whole - building production and cash flow remains our overarching strategic imperative.”

At 1504 BST, shares in Challenger Energy were down 23.99% at 1.31p.