Oil and gas production company Prospex Oil and Gas Plc (LON: PXOG) have seen their shares dive on Monday morning following the Company’s announcement that it had not discovered any commercially recoverable resources, after it commenced spudding of its concession in Romania last week.
The Bainet-2 well is a recent addition to the Company’s portfolio, and today’s news will be a disappointment to investors, following Prospex’s positive outlook in their update last week (26/06/19).
Attached to last week’s statement, Non-Executive Chairman Bill Smith noted,
“Bainet West was only added to our inventory of prospects in Romania in March 2019 following the Concession’s enlargement, so the commencement of drilling a little over three months later is an exceptional achievement, one which is testament to the first-rate operations team on the ground, the business-friendly environment in Romania, and our partner’s excellent in-country knowledge and experience.”
Prospex is understood to have held a 50% non-operated interest in the concession, and the Bainet-2 well had a depth of 656 metres.
The Company brought in venture operator Raffles Energy to drill the well, and overall, the cost of plugging and abandoning the venture is estimated to stand between €260,000 – 520,000
Prospex comments
On today’s update, Chairman Bill Smith adopted a different tone to that of his last comment:
“Clearly the result of the Well is not what we were looking for, however, our first thoughts are to commend the operations team on the ground and our partner in the Concession on the drilling of Bainet-2 without incident, within budget and on schedule. Bainet-2 had a favourable risk / reward trade-off. However, as is the nature of oil and gas exploration, discoveries can only be made following success with the drillbit, regardless of the presence of a number of producing fields and historic discoveries on or around a licence, as is the case with Suceava.”
“Importantly, the result of Bainet-2 has no bearing on the considerable asset backing behind the Company, specifically the 2.26 bcf 2P reserves and 2.40 bcf contingent resources assigned to our 17% interest in the soon to be producing Selva field, onshore Italy. It is worth bearing in mind that If we were looking to acquire an interest in a licence with net reserves of 2.26 bcf and 2.4 bcf 2C resources, we would expect to pay a sum considerably more than the current market value of the Company. Furthermore, the result of the Well has no bearing on the company-making gross prospective resources we have identified across our portfolio of onshore European projects, including the up to 830 billion cubic feet of gas (Best Estimate, Gross) at the Tesorillo gas project in Spain and also our 17% share of the 91.5Bcf (Gross) prospective resources estimated for four prospects close to Selva in Italy.”
“In Spain work is underway to de-risk the huge resource base and identify suitable drilling locations. In Italy, in addition to bringing Selva online at a rate of up to 150,000 cmpd in 2020, the partners are planning to acquire 3D seismic across already identified prospects, a number of which are considerably larger than Selva. We are also closely evaluating new projects with a view to adding a fourth leg to our portfolio, grow our pipeline of low cost drilling opportunities and in the process expose our shareholders to more potentially value triggering activity. While Bainet-2 would have been a welcome addition to our previous successes in Romania and Italy, there are plenty more opportunities both within and outside of our portfolio to go for and I look forward to providing further updates on our progress in due course.”
Investor notes
As stated, the Company’s shares dipped sharply during early morning trading on Monday, down 26.49% or 0.049p to 0.14p 01/07/19 10:34 GMT.
In the oil sector, there have been updates from; TomCo Energy Plc (LON: TOM), Rose Petroleum PLC (LON: ROSE), Petrofac Limited (LON: PFC), Eco Atlantic Oil and Gas Ltd (CVE: EOG) and Mayan Energy Ltd (LON: MYN).