By John Lee.
Shares in Afren plc have fallen more than 20 percent on Monday morning, after the company provided the following update in relation to its sixty percent working interest in the Barda Rash field in the Kurdistan region of Iraq:
An updated Competent Person's Report (CPR) of Barda Rash, carried out as part of the Company's annual reserves review, is expected to show a material reduction to previously published estimates of reserves and resources, essentially eliminating gross 2P reserves of 190 mmbbls and revising gross 2C resources from 1,243 mmbbls to around 250 mmbbls.
The movement in 2P and 2C reserves and resources has been due to the 2014 reprocessing of 3D seismic shot in 2012 and processed in 2013, alongside results from the Company's drilling campaign.
Overall, the reservoirs have not performed according to previous expectations and the approved Field Development Plan (FDP). The wells have produced higher water cuts than expected and the Company has encountered operational challenges associated with the drilling of difficult complex fractured reservoirs.
Production from these reservoirs could potentially be achieved with the implementation of recovery schemes requiring significant capital expenditure, which may well be appropriate for a company with a different strategic focus. Furthermore, while recent results at the field have indicated the presence of light oil accumulations from the deeper Triassic Kurra Chine reservoirs, these have a high level of associated Hydrogen Sulfide (H2S), which would require significant capital expenditure to develop.
In light of the above, the Company is now considering its strategic options for the Barda Rash field.
As part of the current work programme on Barda Rash, the Company will continue with its commitment to complete the testing of the BR-5 well. The Company will publish the completed CPR once it is finalised.
Toby Hayward (pictured), Interim Chief Executive Officer, commented:
"We are naturally disappointed with the CPR and will now consider our strategic options for Barda Rash. Meanwhile, we will continue to focus on our core portfolio in Africa and allocate capital to our highest cash return projects."
(Sources: Afren, Yahoo!)