- Production averaged 12.8 MBoepd in Q4, 2021 and 12.9 MBoepd for the year ended 2021, meeting the upper end of 2021 guidance of 12-13 MBoepd.
- The amendment, extension and merger of the Company’s Eastern Desert concession agreements into a single agreement has been ratified by Egypt’s Parliament and signed into law by President El-Sisi; payment by the Company of the first modernization payment ($15 million) and signature bonus ($1 million) along with execution of the Agreement by all parties is expected in the coming weeks;
- A 2022 work program and budget is being prepared to continue exploitation of the Agreement in the Eastern Desert of Egypt and increase production in Canada, with the aim of maximizing Company free cash flow and accelerating the maturation of contingent resources into reserves;
- The three 100% working interest South Harmattan horizontal Cardium reservoir wells, drilled in Q3 of 2021, were successfully brought into production in Canada in September and October, 2021, and have achieved encouraging initial average production rates;
- Drilled and cased three development wells in the Eastern Desert of Egypt;
- Natural flow of SGZ-6X well at South Ghazalat ceased in December and artificial lift has been mobilized to the site to attempt to restore production;
- A cargo of Gharib blend crude is scheduled to ship at the end of January and has been marketed by Mercuria Energy Trading;
- As previously disclosed, the Mercuria prepayment agreement was fully repaid in 2021 and the Company’s remaining debt outstanding as at year end was $3.0 million outstanding against the $17.7 million ATB Financial credit facility; and
- The Company collected ~$27 million in receivables in Q4, 2021.
RANDY NEELY, PRESIDENT AND CEO’s STATEMENT
“We are starting 2022 off on great footing in Egypt. With the ratification of our consolidated agreement now complete, we will be finalizing our capital program for Egypt shortly.
Our focus continues to be creating value for our stakeholders. We are very encouraged by the opportunities we have to deploy capital on value accretive projects across our portfolio. It remains our expectation that we will be able to fund our 2022 capital program through free cash flow generated by our operations, and with supportive commodity prices, we intend to revisit our dividend policy in the coming months as the balance sheet strengthens.”
Company production met the upper end of production guidance for 2021 of 12-13 MBoepd. In Egypt this was principally due to the re-commencement of Eastern Desert drilling in Q2, 2021 in response to the anticipated approval of the new Agreement.
Arab Republic of Egypt
Eastern Desert (100% WI)
The Company continued to use the EDC-64 rig in its Eastern Desert drilling campaign, managing to drill and case three additional development wells in K-Field and H-Field during the quarter.
K-66 was drilled to a total depth of 1,809 meters, encountering good gas and oil shows in the Asl-A, Asl-B, Asl-D, Asl-E, and Asl-F reservoirs. Hole instability issues prevented wireline logging of certain zones, however the Asl-A and Asl-B were logged and evaluated, with an internally estimated 25.1 meters of net oil pay in the Asl-A and 20.3 meters net oil pay in the Asl-B. The Asl-B was perforated, put on production, and is currently producing at a rate of 160 Bopd heavy crude oil (field estimate). The well is expected to be recompleted on the Asl-A once the Asl-B is exhausted. The deeper zones encountered by the well, the Asl-D, Asl-E, and Asl-F reservoirs, are being considered as targets in future drilling. Heavy crude is the expected product type for all zones mentioned.
HE-2 was drilled to 1,800 meters total depth, encountering an internally estimated net oil pay of 4 meters in the Asl-B reservoir after being fully logged and evaluated. The expected product type is heavy crude. The well was perforated in the Asl-B and is currently on production at a rate of 220 Bopd heavy crude oil (field estimate).
K-68 was drilled to a total depth of 1,403 meters. The well was fully logged and evaluated, with an internally estimated 22.9 meters of net oil pay in the Asl-A reservoir and 4.6 meters of net oil pay in the Asl-B reservoir. The well will be perforated in the Asl-A reservoir and put on production in January 2022. The Asl-B is expected to be recovered through existing up-dip completions on that reservoir. Both zones are expected to be heavy crude oil.
Subsequent to the quarter the EDC-64 rig is being moved to the K-67 well location, in the K-Field.
As previously disclosed, the Company announced a merged concession agreement with a 15-year primary term and improved Company economics in early December, 2020, and parliamentary ratification and Presidential signature into law of the new Agreement in December, 2021. The Company and Egyptian counterparties anticipate signing the new Agreement, along with payment by the Company of the first modernization payment ($15 million) and signature bonus ($1 million), in the coming weeks. The effective date for the improved concession terms in the new Agreement is February 1, 2020.
The Company is in the process of finalizing a 2022 work program and budget that reflects our focus on free cash flow through continued development activities on the contingent resource projects previously disclosed, and production-sustaining infrastructure improvements. The Company anticipates maintaining a single drilling rig, along with a light rig for well maintenance and recompletion activities in the Eastern Desert throughout 2022.
Western Desert – South Ghazalat (100% WI)
Natural flow of SGZ-6X well at South Ghazalat ceased in December due to low reservoir pressure, and rigless-deployed artificial lift equipment has been mobilized to site in an attempt to restore production. Immediately prior to the well-ceasing production, the lower Bahariya reservoir at SGZ-6X was producing at a field estimated 240 Bopd of light crude oil with a 71.5% watercut.
Initial well testing of the oil-bearing lower Bahariya reservoir discovered in the SGZ-7B exploration well drilled in October, 2021 has indicated low productivity and sub-commercial flowrates. The well has been suspended pending further evaluation of options to improve productivity on the lower Bahariya reservoir, and to assess the commercial potential of the gas-bearing upper Bahariya reservoir.