Global Energy Development (LON:GED), the Latin America focused oil and gas group, has been rocked by news that the Rio Verde 2 exploration well on its 100% owned Rio Verde contract in Colombia has been unsuccessful. Shares in the group tumbled by nearly 40% to 70.5p on the news that despite positive signs during drilling, the well only encountered uncommercial heavy oil and gas in one of four zones. Global Energy said it would now hand back the Rio Verde fault block to the National Hydrocarbons Agency and carry on with its three year plan. The next well in the schedule is Tilodiran 4, on the producing Tilodiran field, which is should be completed by the end of the year.

Rio Verde 2 was drilled to a final depth of 12,340 feet and log evaluation had indicated commercial hydrocarbons present. Despite two sets of independent consultants advising that well testing should proceed, four zones between 11,300 and 12,100 feet - Middle Gacheta, Lower Gacheta, Upper Gacheta and Guadalupe – found no commercial hydrocarbons Of the four zones, only the Lower Gacheta tested heavy oil and gas, but in non-commercial quantities. All the other zones tested fresh to low chloride water with no oil. Global Energy tested its production casing to confirm that no mechanical issues could have created a casing leak allowing shallow fresh water zones to affect the various tests. No mechanical problems were eventually detected and it was concluded that the low salinity water tests were valid. The preliminary geological conclusion regarding the Rio Verde fault block is that the fault seal was ineffective and allowed all hydrocarbons to leak up-dip into the adjacent productive Boral fault block.

In March this year, Global Energy announced plans speed up its drilling activity in order to boost production levels. As part of a three year plan, the company said its focus was on increasing production volumes at the same time as developing its reserve base. The news came as the company announced that revenues had fallen to $22.2m last year against $32.8m in 2008 on the back of lower oil prices. As a result, pre-tax profits were down at $2.7m from $9.9m previously.

As part of its new plan, Global Energy planned to drill 13 strategically located wells, plus one well re-entry, along with two accompanying seismic acquisition programmes and…

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