REG - Caspian Sunrise plc - Strategic & Operational Update

Caspian SunriseAnnouncement

25/03/2024 07:00

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RNS Number : 0546I  Caspian Sunrise plc  25 March 2024

 

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 (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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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