LONDON (Alliance News) - San Leon Energy PLC shares dropped on Wednesday after it said a recently completed well in Poland has proved uncommercial, costing the company around EUR1 million, and said it has delayed the drilling of a well due to the high cost in a weak oil environment.
San Leon shares were down 8.9% to 0.820 pence per share on Wednesday morning.
The company has completed the second of a three well drilling programme on the Bielsko-Biala concession in Karpaty, Poland, which has now been tested, plugged and abandoned. San Leon said it penetrated all planned targets but said low gas rates were achieved and the primary sandstone did not have a sufficient seal, making it uncommercial.
The net cost to San Leon for its 60% interest in the well is expected to be below EUR1 million.
The Niwiska well, separate from the three-well drilling programme, also has been deferred and will not be drilled in the near term. San Leon would be obligated to 100% of the cost of the first well, targeting oil, on Block 243 in the Permian basin, totalling around EUR1.7 million.
"As a result of the current depressed oil price, San Leon has reviewed the risked economics of the prospect and has concluded that it is prudent as a farminee not to drill the well at this time," said the company.
On a more positive note, the Rawicz-12 appraisal well, also in Poland, hit a gas reservoir and will now be flow tested and evaluated to determine the commercial potential of the Rawicz gas field. San Leon is not obligated to invest in drilling at the field and holds a 65% interest, with Palomar Natural Resources operating the gas field.
"We are now preparing to test the Rawicz-12 well in Poland with our farm-in partner Palomar, and this will be followed by further work on wells in the Siekierki gas field," said Executive Chairman Oisin Fanning.
"Gas production in Poland will attract high prices and, as the majority of our portfolio in Poland is gas, finding and producing gas this year will be the key to success," added Fanning.
At the Timahdit field in Morocco, oil shale bench testing has been carried out to test the shale oil yield of recently-acquired oil shale samples from the Timahdit licence. The oil shale, from various different rock layers, was crushed and processed under a range of conditions.
The testers, Enefit have described the results as "positive", and the results have been passed on to the operator, Chevron Lummus Global, who will evaluate them.
"In Morocco, we continue to move the huge resource of our Timahdit shale oil acreage towards development in a prudent fashion. The suitability of the Enefit process to our oil shale is highly encouraging, and provides the backbone for the updated pre-feasibility study which will be used to generate an optimised financial model and to attract development investment," said Fanning.
"Bids from leading engineering companies to update the previous pre-feasibility study are being evaluated. Costs will be strictly controlled in light of the current oil price," said San Leon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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San Leon (SLE)