Oil firm United Oil & Gas (UOG:AIM) fell 18.8% to 2.7p as it downgraded its annual output forecast after a higher proportion of water started being produced at key wells in Egypt.
Full-year output from the Abu Sennan licence in Egypt was now expected at 2,100 to 2,300 barrels of oil equivalent per day (boepd), down from previous guidance of 2,500 to 2,700 boepd.
The ASH field at the Abu Sennan licence has three wells in production, which performed well in the first half.
However, since early July the water-cut, the proportion of water to oil being produced, had increased on all three wells, particularly on ASH-2, where it had increased at a faster rate than expected.
CONSIDERING ITS OPTIONS
United said the joint venture partners had performed a number of operations to investigate options for controlling the water-cut and stabilising production.
These included looking at the effect of differing choke sizes, shutting in various perforated intervals, and running production logging tests.
Specialist broker SP Angel commented: ‘The increased water-cut and production guidance reduction will come as a disappointment to shareholders however we do note that UOG’s low-cost production base continues to deliver positive operational cash flows and has been a very successful asset to the company and its partners.
‘Importantly UOG has added a further well to its 2021 drilling program, in addition to the already drilling ASX-1X exploration well, which will aid long term production maximisation in our view.’
