LONDON (Alliance News) - Greka Drilling Ltd on Friday said it drilled more wells at a faster rate for oil and gas companies during 2015 compared to a year earlier and enters 2016 with a positive outlook as it looks at expanding into new markets.
Greka shares were trading down 5.7% to 3.70 pence per share on Friday morning.
The company offers drilling services for oil and gas companies and currently has customers in China and India, drilling wells using its LiFaBriC technology, which is an adaptation of the horizontal drilling methods traditionally used for drilling in coal seam reservoirs and designed specifically for certain types of geology in both those countries.
Greka drilled a total of 62 wells during 2015, a 38% rise from last year when it only drilled 45 wells. The company drilled 53 wells in China and 9 wells in India, compared to 38 and 7 wells last year, respectively.
Fellow London-listed Green Dragon Gas Ltd remains the company's biggest customer, with 51 of those 53 wells in China being drilled for Green Dragon during the year. The other two wells drilled in China were on behalf of PetroChina.
The relationship between Greka and Green Dragon is held together by Randeep Grewal, who is the chief executive of Greka and chairman of Green Dragon, which he also founded.
Green Dragon operates over eight licence blocks in China producing coalbed methane gas using Greka's LiFaBriC wells. In 2014, Greka only drilled 18 wells for Green Dragon.
The nine wells drilled in India during the year were under contracts with Essar Oil Ltd.
Green Dragon has become a more important customer to Greka in 2015, as 82% of all of the wells drilled by Greka in 2015 were on behalf of Green Dragon, compared to only 40% last year.
Greka said it will focus on its contract with Green Dragon in 2016. On Thursday, Green Dragon had said it expects 2016 to be its best-ever year financially and operationally as it focuses on building infrastructure around previously drilled wells to bring them into production.
Although Green Dragon's focus in 2016 will be on the wells that have already been drilled, it does plan to drill some new wells during the year and is hoping the increase in production from existing wells will generate earnings to allow the company to leverage its debt capacity to allow more drilling in the future.
Greka also will progress its ongoing discussions with Essar about further drilling work in India at the Raniganj East block in the hope of retaining Essar as a customer and winning more work as the existing contract under which the wells in 2015 were drilled has now expired.
Greka said it aims to attain new contracts in both countries and has identified Europe and Australia as two new markets into which it could expand in the future, and said it would assess opportunities in those regions this year but did not confirm whether or not it has definitive plans to expand.
The company is expecting the first six months of 2016 to be fairly quiet, and said it will try to capitalise on the "limited activity" expected in the period to reduce costs.
The increase in drilling by Greka resulted in a 31% lift in the amount of metres drilled in the year, totalling 76,690 metres compared to 58,280 metres in 2014 - with 66,700 metres drilled in China and 9,920 metres in India.
In addition to the increase in drilling, Greka also sped up its drill rate. It took Greka an average of just over 32 days to drill each well in 2015 compared to 37 days the year before.
"Although the coalbed methane (CBM) production business in China remains one of the most attractive gas production markets in the world, and we remain bullish on the medium to long prospects for CBM in India, Greka Drilling is not immune to the crisis that has hit the oil and gas industry," said Chief Executive Grewal.
"Thus, we continue to focus on taking actions to reduce our fixed cost base during the industry downturn and push towards a business that has a primarily variable cost structure, strong operational optionality and diverse client base," he added.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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