The outlook for Gulf Keystone’s Shaikan block in the Kurdish region of Iraq is continuing to improve, as the London-listed explorer posted an operational update today indicating further production potential.
The Shaikan 4 well has continued to increase its production rate, hitting 6,970 gross barrels of oil per day on 4 March 2012, according to the company. Since 25 February test production under an extended well test program has averaged 5,641 gross bopd.
“We believe that these new results of the ongoing Shaikan-4 well testing programme are excellent,” COO John Gerstenlauer said in a company statement, “confirming our early understanding that this well may prove to be our best one to date in the Kurdistan Region of Iraq.”
The sixth Shaikan well– the first to test the potential of the upper side of the inclined fault bounding the Shaikan structure – is also promising. According to the company:
The first five tests have been conducted in the northern “footwall” – on the lower side of the inclined fault bounding the Shaikan structure. This is the first occurrence of flow from the footwall and proves an extension of the Triassic and Jurassic reservoirs outside the central part of the structure. The latest test (Test 6) is being conducted in the “hanging wall” (the upper side of the inclined fault) from a new reservoir in the uppermost Sargelu formation which had not been previously flow tested. The test is ongoing and rates in excess of 4,000 boepd have been recorded.
The company also reported a successful sidetrack following a stuck bit at its Shaikan 5 appraisal well, and a halt to drilling at its Aqra-1 appraisal well after the rig was struck by lightning.
Gulf Keystone is now tendering for the construction of an export pipeline to hook the Shaikan field up to the creaking Kirkuk-Ceyhan export pipeline.
Paul Kavanagh, partner at stockbrokers Killik & Co, tweeted that the release was “clearly designed to reassure after last week’s sell off,” when shares tanked by over 24% in response to reports that ExxonMobil – a purported suitor– had days to decide whether to stick it out in the region, and several cautious analysts’ notes.
The ability of Gulf Keystone to get paid reliably for selling its oil abroad is contingent on the passage of an oil law regularising Kurdish contracts with Baghdad, which several sources and analysts say is unlikely to be resolved any time soon.
Shares are trading down around 6% at the time of writing (13:15 DXB) at 270p – though there are signs of positive momentum as investors buy back in – suggesting that positive operational news is not enough for restive shareholders expecting news of an acquisition, while hopes of ExxonMobil making an inflated bid continue to fade.
The full update is available from the London Stock Exchange.
