Predator Oil & Gas shares sank on Tuesday after the company ran into trouble in phase 1 of the rigless testing of its onshore gas asset.
Predator said rigless testing with small perforating guns encountered formation damage and will now pursue phase 2 testing using Sandjet. The company said they were confident the next stage of testing would establish gas flow.
Predator has encountered operational constraints in recent months and rescheduled works as a result. Today’s long-awaited update will not have been the one investors – who will now await further testing results – were hoping for.
The company had previously alluded to phase 2 being the critical stage in testing but that has not softened the blow for investors.
“The Phase 1 rigless testing programme has confirmed our long-standing plans to use Sandjet to better target a number of zones of interest identified by the NuTech petrophysical interpretation. The presence of potentially deep formation damage caused by heavy drilling mud has re-confirmed the necessity to test these zones for which the wireline logs are likely to have been impacted by the invasive drilling mud,” said Paul Griffiths, Executive Chairman of Predator.
“We are very confident that we can design the Sandjet testing parameters to extend beyond the zone of formation damage.”
Investors appear not to share this confidence and shares were down over 30% at the time of writing.
The company said there were no changes to the discretionary working capital available to carry out the testing programme.
Predator did not, however, say whether the working capital available would be enough to complete the planned programme or, indeed any additional work required in light of today’s setback.
There is no suggestion Predator is facing capital constraints but to mention available working capital alongside today’s disappointing developments would suggest the company is conscious of funding requirements.
“Resources estimates remain unchanged and there are no changes to available discretionary working capital to carry out the Sandjet testing programme. We are however fully aware that we need to flow gas from our main zones in the most effective manner after accounting for formation damage, and we have confidence in Sandjet achieving that objective,” Paul Griffiths said.
