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Egypt: United Oil and Gas announces Abu Sennan reserves upgrade and production update


24 Jun 2020

Photo - see caption

Highlights

  • 13,900 boepd gross (3,060 boepd net working interest) average production from the Abu Sennan concession for the first half of June - a 69% increase compared to average April production (1,810 boepd net)
  • Total production during that period has benefited from the ongoing testing of the El Salmiya-5 Well, with c. 4,000 bopd and in excess of 16 MMscf/d (7,200 boepd) contribution from the El Salmiya Field
  • Independent reserves report by Gaffney Cline & Associates ("Independent Reserves Report") from the end of 2019 indicates an increase in reserves and contingent resources at Abu Sennan:
    • 12.5% increase in Abu Sennan Gross 2P Reserves to 13.5 MMboe (15% gas) compared to 12 MMboe at the beginning of 2019, representing a 190% reserves replacement ratio
    • Gross 1P reserves up by 76% to 4.2 MMboe and gross 3P reserves up by 46% to 28.6 MMboe (from 2.4 MMboe and 19.6 MMboe respectively at the beginning of 2019)
    • Gross 2C contingent resource add of 0.73 MMboe
    • Reserves upgrade does not include the recent drilling success at the El Salmiya-5 Well
  • The Company will hold an investor call at 11:00am on Thursday 25 June 2020, the details of which are provided below

United Oil & Gas has provided an update on the Abu Sennan concession in Egypt in which UOG holds a 22% working interest. This includes a production update covering the first half of June and the results of an Independent Reserves Report which estimates gross 2P reserves at Abu Sennan increased to 13.5 MMboe from 12 MMboe over the course of 2019 following drilling success.

Photo - see caption
Abu Sennan concession, Western Desert, Egypt (Source: Gaffney Cline & Associates CPR Report, 29th October 2019)

Production

Production from the Abu Sennan concession has continued to outperform the Company's pre-completion expectations, with production from the first half of June averaging 13,900 boepd gross (3,060 boepd net). This has been underpinned by strong production from the El Salmiya-5 well-testing (c. 4,000 bopd and over 16 MMscf/d gross (c. 7,200 boepd) from the El Salmiya Field since the beginning of June), and continuing consistent production from the ASH-2 well, which was successfully drilled and brought online in January 2020. Although it is still early days on the El Salmiya-5 well, and United expect the well to be choked back in order to optimise ultimate recovery, the results to date have clearly demonstrated the capacity of the well to deliver high production rates. Production at Abu Sennan continues to benefit from low operating costs of c. $6.50/bbl.

Reserves

The results of an Independent Reserves Report that was completed on the Abu Sennan concession at the end of 2019 by Gaffney, Cline & Associates, using PRMS definitions for Reserves and Resources, has now become available to United. The results are summarised in Table 1, below. The report indicates that gross 2P reserves have increased to 13.5 MMboe (15% gas) compared to 12 MMboe at the end of 2018. This is an annual increase of 12.5%, and given that nearly 1.7 MMboe was produced from the Abu Sennan assets during 2018, indicates a reserves replacement ratio for 2019 of 190%. Gross 1P and 3P reserves have also increased, with 1P reserves up by 76% to 4.2 MMboe and 3P reserves up by 46% to 28.6 MMboe (from 2.4  MMboe and 19.6 MMboe respectively at the beginning of 2019).

Applying United's 22% working interest to the gross 2P reserves at the end of 2019 gives 2.97 MMboe, up from 2.64 MMboe at the end of 2018.

It is worth noting that although the Independent Reserves Report included an uplift for the results of the ASH-2 well and the Al Jahraa gas that was brought onstream in March 2020, it was completed prior to the results of the El Salmiya-5 well. Similarly, as the report also predates the approval of the plans to bring the gas from the ASH field onstream, this gas is only included as contingent resources, with 2C estimates of 0.73 MMboe gross. These two developments would almost certainly have a further positive uplift on reserves.

Table 1. Reconciliation of Abu Sennan Reserves as at 31st December 2019 with Reserves as at 31st December 2018

Photo - see caption

Notes:

  1. Revisions are due to production performance in 2019, the results of wells drilled in 2019, and the maturation of the gas development for Al Jahraa; exploration adds include the AS-Z discovery and the AR-E, AR-G, Upper Bahariya and Lower Bahariya II pools discovered by Al Jahraa-7
  2. 2019 production is estimated based on actual production to end October 2019
  3. Totals may not exactly equal the sum of the individual entries due to rounding
  4. United holds a 22% net working interest in the Abu Sennan concession

Jonathan Leather, COO, United Oil & Gas:

'It is really pleasing to see the Abu Sennan assets continuing to perform so strongly and the potential that we recognised in the assets being realised. Much as we expect the production at the El Salmiya-5 well to be choked back from the current levels, it is fair to say that net production of over 3,000 boepd at this stage has surpassed even our own high expectations for the Licence.

'We remain highly confident that the Licence has more to offer.  Further development at the ASH field is expected to deliver additional gas before the end of the year, further enhancing production and cashflow. We also see substantial exploration opportunity on the licence and are working towards optimising targets for further exploration drilling in due course. 

'This independent review of reserves should send a clear message about the strength of the Company's Egyptian assets and, together with our booked reserves at the Selva field in Italy, serves to highlight the considerable asset value behind United - a notable discrepancy when compared to our current market capitalisation.  We look forward to working with our partners to maximise the value of those reserves for our shareholders.'

Original article link

Source: United Oil & Gas





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