Givot Olam Oil Exploration LP (TASE:GIVO.L) announced at the close of trading yesterday that there were commercial quantities of oil at its Meged 5 well, and that the partnership intended to prepare for production at the well. The partnership's share price tumbled 14.7% in early trading today to NIS 0.087, giving a market cap of just under NIS 1 billion.
Givot said that it will continue the production tests at Meged 5, located near Rosh Ha'Ayin, and the cleaning of bore would continue until Monday. The testing equipment will then be dismantled and sent back overseas. By August 15, the well will be ready for production and the assembly on site of the production equipment.
Givot said that, during 189 hours of flow during the intermittent production tests at the well between July 4-20, the well produced 3,015 barrels of oil, which also contained gas. The gas was equivalent to 90 barrels of oil a day, which when added to the oil production enhances the commercial viability of the well.
A quick calculation indicates that this amounts to a production rate of 382 barrels a day, and 472 barrels of oil and gas a day.
Givot did not state the size of the Meged 5 reservoir, a figure that investors were expecting from the analysis of the production tests. The partnership is waiting for the engineering report from the foreign consultant on this point. The preliminary report is due on August 15 and the final report on September 15.
Givot cautioned, "The production rate to date is not completely stable, and varies by up to 50 barrels a day. The partnership attributes this fluctuation to the cleaning process of the well bore, which is not yet complete."
Givot also cautioned that the flow rates from sections 1-6 of the well bore were less than the theoretical amounts calculated separately for each section. The partnership attributes the shortfall to "geological factors and the circumstances of the equipment and devices used in the tests."
No production tests have been carried out yet at sections 7 and 8, so commercial production could potentially increase.
A market source told "Globes" yesterday, "This is a commercial well that is worthwhile to go into production, but it won't turn us into Saudi Arabia. Givot did not state the total size of the reservoir as it's waiting for the engineering report. I predict sales of shares tomorrow, because the market expected a flow of 500-600 barrels a day. The numbers are close to expectations, but there's no indication of the total size of the reservoir, and that's problematic."
His prediction materialized.
Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2010
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