The share price of Roxi Petroleum (LSE: RXP) is currently down over 25 % in trading so far this morning. The nose-dive in value follows the publication of an operational update about its BNG asset in the west of Kazakhstan, in which Roxi has a 58.41% interest.
Last month, Roxi said that commencement of a 30-day well test at Deep Well A5 depended on removing fluids used in drilling the well from the sub-surface. Unfortunately, Roxi now says that removal has been “problematic”, a situation it attributes to the high-density of the fluids needed to withstand the extremely high-pressure in the well.
The fluids were being removed using coil tubing equipment, but this has now become stuck at a depth of 3,000m, and Roxi says that it’s working with contractors to remove it from the well. The company also commented that, despite the stuck equipment and excess fluid, oil has actually flowed naturally to the surface, and that there’s a chance that the high-pressure in the well will help expel additional fluid and facilitate removal of the tubing. Failing that, Roxi says it will side-track the well at a depth of 4,320m, which would take an additional three months.
Roxi also said that over the past year its confidence the BNG field’s potential — especially its deep prospects — has increased significantly. As a consequence it says that its “development philosophy” will be to maximize the size of the P1 and P2 reserves, and that, where appropriate, it will sell its interests in other assets in order to fund development of BNG, in preference to doing so only via methods that would dilute existing shareholder equity.
Commenting on the update, Roxi chairman Clive Carver said
“The continuing delays to the commencement of the 30-day well test at Deep Well A5 are clearly frustrating. It would be good to be able to demonstrate what we believe to be the case at BNG with solid numbers and also to start banking the revenues from the sale of test production oil.
“Nevertheless based on what we have seen to date at Deep Well A5 we believe the deep prospects at BNG contain a substantial reservoir of low sulphur, light grade oil with limited associated gas.
“Based on this we plan to work steadily over the next two and half years to drill the wells required to maximize the reserves associated with BNG at the least dilution to Roxi shareholders.“
Despite this morning’s plunge, Roxi’s share price remains 200% up on this time last year, since when the AIM All-Share has fallen 13.5%.
