(Alliance News) - London-based IOG PLC on Monday said test rates on its Elgood gas development well, located in the UK southern North Sea, were ahead of expectations despite a number of mechanical issues.
Shares in IOG were down 13% at 20.49 pence each in London on Monday morning.
IOG owns and operates a 50% stake in several gas reserves in the UK southern North Sea.
Test rates on the Elgood well were ahead of expectations, with a maximum rate of 57.8 million standard cubic feet per day, IOG said.
However, a number of mechanical issues were experienced on the Elgood well since it spudded on April 9, which extended the work beyond the initially expected three-month duration.
Having investigated the root causes of these issues, the company and its contractors are putting in place protocols and procedures to limit the potential for similar mechanical issues to occur in subsequent wells.
Preliminary integration of the Elgood well data, prior to the well test, had indicated that the range of ultimate recoverable gas may be less than the pre-well estimates, IOG said, but the company now will conduct a full technical review to determine an updated range of ultimate recoverable gas from the reservoir. This will require further modelling and analysis of several months of production, it added.
However, IOG added: "In light of the higher-than-expected clean-up flow rates combined with the high forward gas pricing environment for the coming year, management believes that near-term Elgood cashflows are likely to exceed the company's planning base case."
Chief Executive Andrew Hockey said: "We expected the Elgood well to be technically challenging, being the first development well drilled on the smallest Phase 1 field and the only subsea tie-back in the programme. The mechanical issues experienced have indeed tested my team, but thanks to their hard work, resourcefulness and diligent collaboration with our key contractors, Petrofac [Ltd], Noble Corp and Schlumberger [Ltd], we have now completed it safely and successfully."
By Amrit Sahota; newsroom@alliancenews.com
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