Oil and gas operator Roxi updates the market with news of progress at its flagship BNG together with updates on the sale of Galaz and the proposed BOCO investment.
Deep Well A5
The well was spudded in July 2013 and drilled to a total depth of 4442 m with casing set to a depth of 4077 m to allow open hole testing. Core sampling revealed the existence of a gross oil-bearing interval of at least 105 m from 4332 m to at least 4437 m.
In February 2015, the company announced that the major part of coil tubing had been removed from the well. The 50 m of coil tubing remaining in the well, which still contained drilling fluids, was trapped at a depth of 2996 m with a metallic object believed to have been dropped during the clean-up works.
The blockage at Deep Well A5 has now been cleared. Pressure in the well has returned to levels encountered when it was originally drilled and the 30-day well test is set to commence following the delivery on site of additional pipes.
Deep Well 801
Deep Well 801 was spudded on 15 December 2014 with a planned Total Depth of 4,950 m. The well is located approximately 8 kilometers from Deep Well A5 and was planned to target the same structure as Deep Well A5 in the Middle and Lower Carboniferous.
The well is being drilled by Sinopec, the Chinese multinational, at a fixed cost of US$11 million.
Drilling has reached a depth of 4790 m without incident. Core samples and logging reveal a potentially oil bearing interval starting from 4536 m and extending 100 m. The pressure and temperatures encountered indicate this potential accumulation is unlikely to be connected to the accumulation encountered in Deep Well A5. Therefore should Deep Well 801 prove commercially viable it would be a separate discovery to the potential discovery previously announced in connection with Deep Well A5.
After running casing string to the current 4790 depth we now plan to continue drilling to a new Total Depth of 5100 m targeting Lower Permian and Middle & Lower Carboniferous oil bearing reservoirs. A liner will be run from 4790 m to the new 5100 Total Depth.
Sale of Galaz
In February 2015 the conditional sale of Roxi’s interests in the Galaz Contract Area to a consortium led by Xinjiang Zhundong Petroleum Technology Co. was announced. The conditional sale includes an aggregate consideration of between US$90 - 100 million, depending on the price of Brent crude oil. At the lower valuation Roxi's effective consideration would have been US$20 million. However, following an increase in the price of Brent crude the aggregate consideration will be US$100 million and Roxi's effective consideration has increased to US$23 million.
Under the agreement US$2 million of the aggregate purchase consideration will be retained by the purchaser for a period of 12 months to cover warranty claims individually greater than US$50 000. Of the US$2 million retention US$0.68 million relates to Roxi.
The buyer has received all the required regulatory clearances. The first part of the completion process has already taken place with the buyer paying US$58 million of the aggregate purchase price to LGI & Sary.
The second phase of the completion involving payments to three other sellers, including Roxi, requires separate Chinese exchange control approval and is now expected to occur in the first two weeks of June.
Accordingly Roxi and the buyer have agreed to extend the date for completion until 12 June 2015.
Impact on Roxi
Once received Roxi plans to use the funds from the sale of the Galaz Contract Area to fund all of the planned development in 2015 at the company's flagship asset BNG.
Additionally, as previously announced, under the terms of the 2008 acquisition of 59% of Eragon Petroleum PLC from Baverstock, Roxi had an obligation to carry Baverstock for the first US$100 million of costs on the Eragon assets (BNG, Galaz & Munaily). This obligation has now been fulfilled and the responsibility for further development funding for the Eragon (principally BNG) assets will be in the ratio 59:41 between Roxi and Baverstock.
With the declining costs of drilling following the recent fall in the price of oil the amount attributable from the sale of Roxi's interests in Galaz is expected to be sufficient to fund all of the 2015 development costs at the deep and shallow regions of the BNG asset and in particular cover the costs of three further deep wells (801, A6 & A7) to the Deep Well A5 drilled in 2014.
The expected accounting profit after tax on the disposal of Galaz to be included in the 2015 Roxi financial statements is some US$15 million.
In April 2015, Roxi announced the agreement to issue new shares at an effective price of 18p per shares to BOCO, a large Chinese conglomerate, to raise US$20 million. However, in light of the imminent completion of the sale of Galaz and difficulties in receiving timely payment, Roxi has informed BOCO it is not continuing with this subscription and has terminated discussions with them.
Adapted from press release by Cecilia Rehn