TIDMCASP
RNS Number : 7600R
Caspian Sunrise plc
31 October 2023
Caspian Sunrise PLC ("Caspian Sunrise" or the "Group")
Operational update
Introduction
The Board of Caspian Sunrise is pleased to provide the following
operational update on the Group's activities.
Impact of sanctions
Shareholders are reminded that neither the UK nor the EU has
imposed sanctions on oil produced in Kazakhstan and transported via
the Russian pipeline network. Nevertheless, the sanctions on Russia
continue to have a significant impact on the Group's current
position.
The disruption from the need to source drilling consumables from
China continues to have an adverse impact on day to day operations.
However, on a more positive note, the discount for oil produced in
Kazakhstan and sold internationally via the Russian pipeline
network has narrowed from the initial $35 per barrel to nearer $10
per barrel.
The two month lag in receiving payment for oil sold
internationally and the associated costs and taxes attributable to
international sales mean, even with Brent at $90 per barrel, we
remain better off selling to the traditional domestic market and
the newer domestic mini-refinery market.
With domestic prices at approximately $32 per barrel and
domestic mini-refinery prices at approximately $34 per barrel we
estimate that the headline Brent price would need to be
approximately $100 per barrel to make a switch to international
sales worthwhile.
BNG Overview
The plan at the two shallow structures on the BNG Contract area
is to use a horizontal drilling approach on the older MJF wells to
target oil in the Jurassic and on the older wells at the South
Yelemes structure to target oil in the shallower Dolomite.
With the deeper structures the plan is to complete the current
mandated drilling programme by drilling Well 803 and completing
Well A7, before looking to bring as many as possible of the deep
wells already drilled into production. After Well 803, it is
unlikely any further deep wells will be drilled at the BNG Contract
area.
BNG Production
Since our last update in the interim results released towards
the end of September 2023, no additional wells have yet returned to
production. Accordingly, production levels remain at approximately
2,000 bopd.
In particular there has been no contribution from the previously
strongly performing MJF wells 142 and 141.
BNG Shallow structures
MJF
At Well 142 the side track is almost complete and ready for
testing, which if successful would lead to the well contributing to
increased production levels from mid-November.
Well 155 is due to be spudded before the end of November and
drilled to a depth of approximately 3,000 meters with drilling
expected to be completed by the end of Q1 2024.
Well 141 is the next shallow well to be worked over with a
horizontal side track with work expected to commence in December
2023.
South Yelemes
Wells 54, 805, 806 & 807 are to be worked over using a G20
rig starting in Q1 2024 at depths of approximately 2,000 meters
targeting the previously unexplored Dolomite.
Deep structures
Yelemes Deep
At Well 802 the problem has been our inability to remove a stuck
pipe to allow the well to be properly tested. Work at Well 802 has
now stopped to allow the rig to be used to drill Well 803 the last
of the deep wells in our BNG work programme, which is due to be
spudded in mid-November and drilled to a planned depth of 3,950
meters. Drilling is expected to complete by March 2024.
We are in early stage discussions with specialist international
drilling companies to have them bring Well 802 into production on a
success basis in return for a revenue split on that well.
Airshagyl
At Deep Well A5 the plan remains to drill a new side track using
one of the rigs recently in use at Block 8, with work starting in
November.
Drilling at Deep Well A7, was paused at a depth of 2,000 meters.
The plan is to use the G70 rig previously used to drill Deep Well
A8 to finish drilling Well A7 to a maximum depth of 4,750
meters.
Other deep wells
At both deep Well A6 and Deep Well 801 we will consider the
various options in light of the outcomes at the other Deep Wells
referred to above.
Production expectations
Our hope and belief is that the work planned for the shallow
structures will significantly improve production levels before the
year end. We also believe the work planned at the deep structures
provides the best chance for a transformative deep well
success.
Block 8
Shareholders are reminded that the option to acquire Block 8 has
been exercised with the timing of completion now largely dependent
on the usual regulatory approvals.
Drilling at the two deep wells undertaken by CTS, the Group's
wholly owned drilling subsidiary, has been completed with both now
preparing for testing. Success with these wells, once the Block 8
acquisition has completed, could also significantly add to
production levels.
Oil trading
We are pleased to report that the encouraging start to our oil
trading activities continues. While we remain cautious, limiting
trading for the time being to oil produced on our own assets, we
believe this new income stream will become increasingly important
to the Group in the coming years.
Caspian Explorer
Preparations continue to make the Caspian Explorer ready for the
summer 2024 ENI contract.
Additionally, we are in discussions with a number of potential
partners concerning further contracts in 2024 and beyond.
3A Best
There has been no change in the position at 3A Best where the
licence has expired, other than KMG, the Kazakh state national oil
& gas company, has acquired the adjacent and highly successful
Dunga field.
Other projects
We are evaluating a number of other on shore and offshore
opportunities both to acquire existing contract areas and to drill
on contract areas belonging to others in return for earning an
equity position. We are also evaluating opportunities in the
minerals sector.
Dividend update
In June 2023 we suspended dividend payments following the
failure to receive the $22.5 million payment due for the sale of
50% of the Caspian Explorer and the adverse impact of sanctions
both on the ability to sell to international markets and the extra
costs involved in sourcing consumables from China. At the time we
undertook to review the position towards the end of the year.
While the discount for oil produced in Kazakhstan and delivered
via the Russian pipeline network has narrowed, the continuing
adverse impact of Russian sanctions plus the number of
opportunities to increase longer term shareholder value by
corporate actions leads the Board to consider the resumption of
dividend payments in the near future to be unlikely.
Auditors
We are please to welcome PKF Littlejohn LLP as the Group's new
auditors starting with the audit for the year ending 31 December
2023.
Corporate presentation
We draw shareholders attention to an updated corporate
presentation, which may be found on the Caspian Sunrise website
using the following link
https://www.caspiansunrise.com/investors/circulars-documents/
Comment
Clive Carver, Chairman said
"We are getting to the point of discovering the outcome of
sustained drilling campaigns at both the BNG and Block 8 Contract
Areas.
Success in the shallow structures would significantly increase
day to day production volumes. Success in any of the deep
structures would significantly impact the Group's longer term
value.
We therefore look forward to updating shareholders with
developments in the coming weeks and months."
Contacts:
Caspian Sunrise PLC
Clive Carver, Chairman +7 727 375 0202
WH Ireland, Nominated Adviser & Broker
James Joyce +44 (0) 207 220 1666
James Bavister
Andrew de Andrade
Qualified person
Mr. Assylbek Umbetov, a member of the Association of Petroleum
Engineers, has reviewed and approved the technical disclosures in
this announcement.
This announcement has been posted to:
www.caspiansunrise.com/investors
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
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(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
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END
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