TransGlobe shrugs off Western Desert miss

23 July 2018, Week 29, Issue 747

TransGlobe Energy has abandoned its North West Sitra 9 exploration well, in the Western Desert, as it was dry, the company said on July 20. The well was targeting a Cretaceous zone and the rig is now moving to South Ghazalat, where it will drill two wells within the same zone. 

The London and Calgary-listed has a rig in position on the NW Sitra 12 exploration well, with drilling expected imminently. In the Eastern Desert, meanwhile, it has moved a rig to the M field, in the West Bakr licence, for a three-well development programme. This will be the company’s third rig in the country. 

Company output in June was 14,900 boepd, of which 12,300 boepd came from Egypt. It sold two cargoes in the second quarter, receiving a total of US$53.7 million. 

The NW Sitra 9 reached a total depth of 5,950 feet (1,813 metres) in a stacked prospect. No hydrocarbons were found in the target zones. The well cost was only US$1 million, for drilling and abandonment. 

A note from GMP FirstEnergy said the dry hole in the Western Desert would have a “negligible impact” on the company’s valuation. “While the drilling result at NWS-9 is disappointing, the Cretaceous wells are targeting only small targets.”

The next well in the Western Desert, the NW Sitra 12, is the well to watch, the analysts said. “The well is targeting a much larger deeper stacked Cretaceous/Jurassic prospect.” This should only cost US$2-3 million, GMP added.

The NW Sitra 12 will be drilled by the larger 2,000 HP drilling rig and should take around 60 days, TransGlobe said. The licence on the NW Sitra licence will expire in January 2019. Before this date, the company can opt for a second exploration phase, which will run for three years and has a two-well commitment, in addition to the relinquishment of 30% of the concession area. 

GMP, which issued a detailed note on the company on July 19, noted that cash flow is driven by its Eastern Desert assets, while the Western Desert offers exploration opportunities, “with four wells to be drilled in [the second half of 2018], which we estimate will target a total of 50 million barrels”. 

Edited by

Ed Reed

Editor

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