Challenger Energy initiates production testing at Saffron-2 well
(CEG ) said the first stage of production testing at the Saffron-2 appraisal well in Trinidad and Tobago has commenced, with wellbore clean-up operations underway.
Challenger Energy has a 100% operating interest in the well and the broader Saffron project.
To date, the Caribbean and Atlantic margin focused oil and gas company has successfully drilled the Saffron-2 appraisal well to a depth of 4,567ft encountering similar Upper, Middle and Lower Cruse reservoirs to those encountered by the former Saffron-1 exploration well.
In mid-July, Challenger said it had completed the logging of Saffron-2 with around 1,400ft of reservoir sands intersected across the Upper, Middle and Lower Cruse formations.
Initial results of the log interpretation have identified over 1,400ft of gross reservoir sands with the results also yielding in excess of 300ft of net oil-bearing reservoir sands (net pay).
Since the logging, the drilling rig has been fully demobilised, to be replaced at site by a Challenger workover rig along with production tanks and major production equipment.
Following the inspection and subsequent formal approval of both the well completion and production facilities by the Ministry of Energy and Energy Industries (MEEI), around 130ft of potential reservoir sands in the Lower Cruse sections of the well was perforated. The Company explained that this will enable production testing from these zones to commence.
Currently drilling materials and fluids are being recovered from the well, which is expected to continue for several days. Once the well has been fully "cleaned-up", pressures, oil and fluid types, and production rates from the Lower Cruse zones of the well can be ascertained. The Group views this as an important part of the process since this reservoir has not previously been tested/ produced.
Thereafter, the other 200ft of net pay identified in the Upper and Middle Cruse zones will be perforated and tested, to give a full assessment of the well's production potential, it noted. The Group said it will update investors once it receives an indication of production potential.
Commenting on the progress, Eytan Uliel, CEO of Challenger Energy said: "The objective of the Saffron-2 well is to understand the production potential from the various reservoir units identified by both the Saffron-1 and Saffron-2 wells, starting with the Lower Cruse intervals.”
Saffron 2, onshore Trinidad, is a twin of the Saffron-1 well, and to date has encountered similar Upper, Middle and Lower Cruse reservoirs to Saffron-1. Based upon the Saffron-1 discovery, the prognosed production rate from Saffron-2 is in the range of 200 - 300 bopd.
In recent weeks, the Company said it has continued to make good progress on securing additional sources of funding, in particular in relation to a potential Saffron development.
Challenger signed a term sheet in June 2021 with Arena Investors, LP for a Convertible Loan Note funding of US$10m (and up to US$17.5m). If concluded, this will provide funding capacity for ongoing development of the firm’s projects, including in particular the drilling of a further three production wells as part of the initial phase of development of the Saffron project.
“We are working to conclude a funding on mutually acceptable terms, with a view to having capital available once we have production data from the Saffron-2 well and have been able to assess development options and schedule for a broader Saffron development,” added Uliel.
View from Vox
The initial phase of developing the Saffron field will involve drilling between five to nine production wells at an estimated capital cost of US$12 - US$20m. This initial program is projected to achieve an average daily production of 1,000 - 1,500 bopd which, based on a US$60/bbl oil price, could generate annualised net operating cash flows of up to US$12m.
Thereafter, the current anticipated full-field development for the Saffron project could ultimately comprise up to 30 wells in total, with a projected peak production of approximately 4,000 bopd, potentially generating annualised net operating cash flows of up to US$25 million.
Following a successful first phase of development of the Saffron project, Challenger expects that it will be able to fund the balance of the overall field development from ongoing cash flow generated from Saffron field production. Accordingly, the facility contemplated under the Term Sheet is expected to be sufficient to fund the first phase of development of the Saffron project.
In June, Challenger told investors that it was making “solid progress” against its goal to reset the business with its core strategic objective focused on growing production and cashflow.
Reasons to CEG
Challenger Energy is a Caribbean and Atlantic margin focused oil and gas firm with a full life cycle of exploration, appraisal, development and production assets and licences. It has assets onshore in Trinidad and Tobago, Suriname and offshore in The Bahamas and Uruguay.
During 2020, Challenger successfully transitioned from a single purpose company into a broader, multi-faceted investment opportunity following its merger with Columbus Energy.
The merger has enabled it to acquire and manage larger exploration licence targets across four key jurisdictions, while it also continues to advance its existing projects in the Bahamas.
Trinidad and Tobago:
- Five producing fields
- Two appraisal / development projects
- A prospective exploration portfolio in the Southwest Peninsula
- Suriname
- Onshore appraisal / development project
- Challenger considers its exploration licences in Uruguay and The Bahamas as highly prospective and expects them to offer high-impact value exposure within its portfolio value.
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