REG - Caspian Sunrise plc - Operational update

Caspian SunriseAnnouncement

31/10/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231031:nRSe7600Ra&default-theme=true

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 (http://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.

 

 

 

 

 

 

 

 

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  UPDWPGMAUUPWGQU