LONDON (Alliance News) - Northern Petroleum PLC on Tuesday said it is working to ramp up production capacity at its Canadian operations, but it's also conducting a technical review of the whole prospect in an effort to allow it to redevelop it economically in light of the oil price decline and said drilling of the latest well resulted in a flow with a high water cut meaning the well is currently uneconomic.
The company said production from its Virgo project in Canada was around 360 barrels of oil per day in January and the group is working to ramp up production to hit capacity of 500 barrels a day. Production was shut in at the end of January to allow the return of expensive rental equipment being used on three wells and to complete pump installation.
Half of the production is set to be on line in the second quarter of 2015, with the company then to work to bring the remainder on.
It said drilling, completion and testing on the 102/11-30 well at Virgo finished in early February but the water cut, combined with the low oil price, means production from the well is currently non economic, the company said, meaning it has been suspended pending a technical review.
"Initial findings indicate that the water production from the upper zone may have flowed from the lower test zone behind the liner, giving rise to a higher than expected water cut. This view is supported by the cement bond log and the data from the liner cementing process. As part of the technical review, this will be investigated along with analysis of the connectivity between individual reefs through the underlying Keg River platform, which may influence remaining oil distribution within reefs," it said.
The technical review has been widened to cover the full redevelopment project at the Virgo prospect, with the aim of enabling the company to redevelop the full acreage economically in a low oil-price environment.
Elsewhere, the company said the work programme for the Cascina Alberto project in Italy is to start following the farm-out of the prospect to Royal Dutch Shell PLC. The company added work has now started on a joint technical study with oil services company Schlumberger Ltd and GEPlan offshore in the Sicily Channel.
"The first quarter of 2015 has been spent reorganising the Company and its operations in Canada in response to the prevailing industry environment. With this exercise completed, the focus for 2015 is to increase economic production in Canada and advance all our assets in Italy," said Chief Executive Keith Bush.
Northern Petroleum shares were down 14% to 4.2 pence on Tuesday, one of the worst performers in the AIM All-Share index.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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