Caspian Sunrise
PLC
Strategic & Operational
Update
Introduction
The Board of Caspian Sunrise is
pleased to present the following strategic and operational
update.
Corporate interest in BNG
The Board has in recent months
entered into a number of discussions with potential buyers
concerning the BNG shallow structures (excluding the BNG deep
structures Airshagyl & Yelemes Deep) at indicative prices
potentially significantly greater than its current carrying value.
Any deal at these levels because of its size relative to the Group
as a whole is likely to require the approval of Caspian Sunrise
shareholders.
We consider the MJF and South
Yelemes structures to be valuable assets. However, as with all of
the Group's assets, there would be a price at which the Board would
judge a sale of all or part of the BNG shallow structures to be in
the best interest of the Group as a whole. In particular as it
would provide funding for new development assets where the Board
believes the Group has the greatest expertise.
At this stage no binding agreements
have been entered into and there is no certainty these discussions
will lead to either a firm offer for all or part of these assets or
that if they did the Board would be minded to put such an offer
before shareholders. Nevertheless, it demonstrates to the Board the
commercial value in these assets.
We believe this heightened level of
corporate interest in BNG's producing shallow structures is in part
the result of the changes last year to the Kazakh oil trading
regulations, which now require the production of oil to obtain a
trading licence, and the relative scarcity of producing fields with
full production licences. The sharp reduction in the discount for
international sales referred to below may also have had an
effect.
The
receding impact of sanctions on oil prices
Recently the market discount on oil
produced in Kazakhstan but transported via the Russian pipeline
network has all but disappeared for international consignments of
approximately 70,000 barrels per month and greater. While we are
not yet producing at these levels on a monthly basis we can see a
time in the near future when it would once again be in the Group's
interest to sell as much oil on the international markets as our
licences permit.
BNG
Operational update
MJF
Production from Well 142, which was
the best producing well before coming out of production in 2022 and
which recommenced production in February 2024, continues to
contribute to the structure's production but has yet to return to
its former levels and we continue to monitor its
performance.
At Well 155, which is the final
shallow well to be drilled under the BNG shallow work programme
commitments, drilling has reached a depth of approximately 1,000
meters of a Total Depth of 2,400
meters with an expected completion date before the
end of Q2 2024.
South
Yelemes
Work to drill new horizontal side
tracks on the four existing Soviet era wells targeting oil in the
Dolomites at depths between approximately 2,200 and 2,300 meters is
underway. Well 805 was the first well in the programme and now
produces at approximately 140%
of its previous level.
Work is now underway at Well 806
with Wells 807 and 54 to follow.
Production volumes
Aggregate production from the MJF
and South Yelemes structures is currently approximately
1,700 bopd.
BNG
Deep Structures
Airshagyl
The rig is now in place to resume
work at Deep Well A5, which remains in the Board's opinion the BNG
deep well with the greatest potential.
At Deep Well A7 we are waiting on
the outcome of the work planned at Deep Well A5 before resuming
drilling, which was paused at a depth of 2,150 meters.
Yelemes
Deep
Well 803 is the final deep well
required under the BNG deep work programme commitment. Drilling has
reached a depth of 1,250 meters
without incident with the primary target at 3,950 meters and a
secondary target at 4,200 meters. Drilling to the secondary
target would only be undertaken if the primary target proves
uneconomic.
Discussions have started with a
potential partner to seek to bring Deep Well 802 into production,
although to date no agreement has been signed.
Licence
upgrade
The technical information to be
collected from Deep Well 803 is expected to be sufficient together
with the information already gathered at the other BNG deep wells
drilled to support an application to upgrade the BNG deep
structures licence to a full production licence.
Block 8
The licence renewal remains the
final substantive condition to the completion of the acquisition of
Procyon Investments FZE, the UAE registered owner of EPC Munai LLP,
which is the Kazakh registered owner of the Block 8 Contract
Area.
The licence renewal is also required
to allow the resumption of production at Block 8 and to allow
testing of the two Block 8 deep wells completed in 2023.
Block 8 is approximately 160 km from
BNG with three identified deep structures on which four deep wells
have been drilled in recent times. The Block 8 purchase price is
capped at $60 million payable from a royalty on future production
from Block 8 at the rate of $5 per barrel.
3A
Best
There has been no change to the
position at 3A Best where once the licence is renewed we would seek
a buyer. The investment in the 3A Best Contract Area was
fully impaired several years ago. Any sale proceeds would therefore
constitute a profit on disposal.
Oil
trading
The Group's oil trading activities
started in January 2023 following a change in the Kazakh
regulations. Since then, the contribution from our oil trading
activities, which to date have been limited solely to our own oil,
have added up to $10 per barrel to the price received on the
domestic market.
Oilfield services
Onshore
CTS, the Group's wholly owned
onshore drilling services company, continues to drill all the
Group's wells and in addition has drilled wells at Block 8. We are
also in discussions with third parties to farm into their
assets in return for future CTS drilling commitments.
With approximately 150 contractors
and owning 5 rigs CTS has become a valuable part of the Group,
generating income and minimising costs and drilling delays and is
expected to facilitate a number of farm-ins over the coming
years.
Offshore
Preparations for the Caspian
Explorer's ENI drilling contract scheduled to commence in Q3 2024
remain on track. Significant pre-contract expenditure has
been incurred with the bulk of the associated revenues due in the
current financial year.
The unique nature of the Caspian
Explorer has also resulted in our inclusion in a number of ongoing
discussions to participate in new much larger scale offshore
drilling projects.
Summary
The corporate activities undertaken
over the past few years, funded principally from the oil produced
from the MJF structure and higher levels of short term debt, have
transformed the Group from an early stage single asset / single
structure entity to a more broadly based natural resources group
with strong asset backing and earnings potential.
The Board believes the Group is now
well placed to turn this potential into reality.
Comment
Clive Carver, Chairman
said
"The Group is now far more than just the MJF structure on the
BNG Contract Area. South Yelemes, the second shallow structure at
BNG, has started to make meaningful contributions. Our onshore and
offshore drilling services capabilities have reached the point
where they should also produce meaningful profits and our
successful start to oil trading is encouraging.
We
look forward to further developing all of these business streams in
the coming year."
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 "UK MAR") which is part of UK law
by virtue of the European Union (Withdrawal) Act 2018.
The information is disclosed in accordance with the Company's
obligations under Article 17 of the UK MAR. Upon the publication of
this announcement, this inside information is now considered to be
in the public domain.
