CERP.L Regulatory News (CERP)

10 July 2017

Columbus Energy Resources Plc

("CERP" or "Columbus" or the "Company")

Operational and Business update

Accelerated work programme to reach cashflow positive position

Columbus, the oil and gas producer and explorer focused on onshore Trinidad with the ambition to grow in South America, is pleased to provide the following operational and business update.

Highlights:

· New leadership team has completed its initial review of operations in Trinidad and its cost base across the Company

· Key aim of the operational review was to develop a work programme in its Trinidad operations, in a capital efficient manner from existing cash resources, with the objective of being cash flow positive across the Company in Q4 2017. This has triggered a fundamental change in several operational activities

· The following targeted initiatives, focused on optimising recovery and production, are being implemented using existing cash resources:

o The Mayaro sand infill programme is now on hold; well decline data indicates that without pressure support any new well will decline rapidly and not deliver on earlier expectation

o The fast-tracked implementation of a simultaneous multi-pilot and multi interval approach to Goudron Field water-injection, commencing Q3 2017, as opposed to the previously announced single pilot water-flood strategy which targeted just one reservoir interval

o A new Goudron Field well stimulation programme, targeting currently producing wells along existing mapped faults in the Goudron Mayaro reservoir

o The installation of smart pumping systems using downhole sensors, firstly on well GY-664

o Well interventions in the existing Bonasse field wells to re-activate continuous oil production aimed at increased production in Q4 2017

· Average production from Trinidad in Q2 2017 was 327 BOPD, with production at the end of the quarter significantly affected by Tropical Storm Bret, the worst storm to hit Trinidad in over 10 years. Operations at the field have re-commenced and production has subsequently returned to pre-storm levels of between 380-420 BOPD

· A number of new operational and commercial opportunities to increase production from existing and new fields which will allow the Company to expand its footprint in Trinidad also identified 

· Company has completed its Head office move, in line with its strategy to reduce its corporate costs, and continues to reduce its Head-office G&A.

Leo Koot, Chief Executive of Columbus Energy Resources commented,

"I joined the Company two months ago and recently spent time in-country, reviewing our operations and am hugely excited by the quality and potential of our assets. Alongside our new Trinidad Managing Director, Stewart Ahmed, and our new CFO, Gordon Stein, we have been busy identifying the best ways to increase production and cash flow across our asset base, from existing cash resources. We are confident that the multiple work programmes set out today, including the acceleration of the water injection programme and introduction of the well stimulation campaign, will help us achieve our short-term goal of becoming cash flow positive in Q4 2017 and create a company with a sustained and strong production base from which to grow."

Trinidad operations update

Following the recent appointment of the new Executive Chairman, Leo Koot, the new Chief Financial Officer, Gordon Stein and the new Managing Director (Trinidad), Stewart Ahmed, who it is intended will be based full-time in Trinidad, the new leadership has completed an initial review of operational options for its current assets in Trinidad. The Company is focused on developing a work programme in its Trinidad operations, in a capital efficient manner from existing cash resources, with the objective of being cash flow positive across the Company in Q4 2017. This will allow additional investment to be made for further growth into 2018.

The Company is progressing targeted initiatives, using currently available resources, aimed at creating multiple paths to increase production revenues in the short term. Further drilling as part of the Mayaro sand infill programme is now on hold, well decline analysis indicates that without pressure support any new well will decline rapidly and not deliver on earlier expectation. Hence our increased focus on water injection, well stimulation and the intention to drill future production and injection wells in pairs. The Company has also identified several longer-term opportunities through which the Company believes it can achieve its stated growth ambition.

The shorter-term initiatives, which focus on optimising recovery and production from the Company's current well-stock, include:

1. Water Injection Pilot programme

Water injection has the potential to increase rate and recovery in the Goudron Field by increasing reservoir pressure from the current depleted levels and by establishing a sweep of the oil towards production wells. The fast-tracked implementation of a simultaneous multi-pilot approach on the Goudron field, through the adoption of an accelerated fit-for-purpose surface facilities design, allows the efficiency of the water-injection programme to be tested in a number of reservoir intervals and field areas prior to decisions on field-wide expansion in 2018 and beyond. 

The Company has accelerated this programme and submitted a Certificate of Environmental Compliance (CEC) to the Environmental Management Authority of Trinidad to begin the planned Goudron Field Water Injection Pilot "A" programme for the Gros Morne 665 Area and is hopeful that approval will be granted this quarter. The Company subsequently presented its proposal for the Goudron Water Injection Pilot "A" programme to The Petroleum Company of Trinidad and Tobago (Petrotrin) and the Ministry of Energy and Energy Industries on 29 June 2017 in Trinidad, seeking their support for the new approach which now involves utilising Goudron Field produced water in a multi-pilot water-injection programme, as opposed to the previously announced single pilot water-flood strategy which targeted just one area of the Gros Morne reservoir. Pilot "A" will be financed from existing available funds within the Company and from forecast revenues from current oil sales.

Water-injectivity and inter-well interference testing has already commenced and essential operational equipment has recently been procured to ensure that water injection into the Pilot "A" wells can commence immediately upon receipt of CEC approval. Pilot "A" consists of a continuous water injection of approximately 500 barrels of water per day (BWPD) of currently produced water from the Goudron Field into up to three target injection wells. The Pilot "A" programme, and subsequent pilot programmes, as described below, are designed to provide incremental oil rate and recovery information that can be used in forecasting to aid a decision on whether to expand the pilot programme within 18 months of each pilot commencement. The submitted forecast increase in production from Pilot "A" reservoir interval is from the current 30 BOPD to a peak of over 150 BOPD.

Further water-injection pilot programmes (B, C & D) are being planned, targeting two areas of the shallow Goudron Mayaro reservoir and also as potential pressure support for the GY-670 well, which initially peaked at over 1,150 BOPD in December 2014. Proposals for Pilot B, C & D are planned for submission in the coming months, taking into account early results and learnings from injectivity testing, Pilot "A" implementation and the stimulation campaign.

2. Goudron Field Well stimulation campaign

In parallel, the Company has started planning a well stimulation campaign, targeting wells in the Mayaro reservoir close to mapped faults where historically Goudron wells have responded successfully to stimulation under campaigns carried out by previous Operators. The stimulation campaign is targeting six existing production wells including the recently drilled GY-683 well and is planned to be carried out across two or more campaigns in the coming months. The stimulation work is expected to provide a sustained incremental rate at between 30 to 100 BOPD.

3. Smart pumping systems using downhole sensors

The installation of smart pumping systems using downhole sensors, firstly on well GY-664 within the coming weeks, allows automatic pump optimisation and will simultaneously acquire continuous downhole reservoir pressure data which can be used in the water-injection Pilot "A" monitoring.

Quarterly production update

Average production from the Goudron Field in Q2 2017 was 327 BOPD. Production was lower at the end of the quarter, significantly impacted by the Tropical Storm Bret on 19 June 2017, the worst storm to hit Trinidad in over 10 years, which cut external power supply to the field for over 1 week and consequently resulted in significantly reduced production operations for a longer period. Sustaining significant damage to overhead power lines, permanent repairs have been made and Operations in the field have returned to pre-storm levels of between 380-420 BOPD.

South West Peninsula

At the Bonasse field as part of the BOLT License, the Company awaits approval from the Trinidad and Tobago Ministry of Energy and Energy Industries for the renewal of the relevant private petroleum licence ("PPL"). In the meantime, the Company has completed initial well interventions across the field in order to understand the condition of field facilities, well completions and the potential for sustained base production. Oil sales from the Bonasse Field have been managed as the available volumes have justified trucked sales to the Point Fortin delivery point.

The oil quality from individual wells has been measured and the gravity shown to be >25 API, which was of higher quality than the heavy oil first expected.

Activity in the South West Peninsula remains focused on gaining approval for the Private Mineral License applications which will allow the Company to continue to mature exploration prospect opportunities in the area. A nomination letter for additional acreage in the area was lodged with the Ministry of Energy and Energy Affairs in June 2017 in response to the Open Bid Round announced in May 2017. 

Corporate update

The Company has completed its head office move, in line with its strategy to reduce its corporate costs, and is now located at Suite 206, Amadeus House, 27b Floral Street, London, WC2E 9DP. Further reductions in the Company's Head-office G&A are planned for the next few months.

- ENDS -

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