LONDON (Alliance News) - Jupiter Energy Ltd Thursday said it made no sales in the second quarter after it shut in all of its producing wells in February to wait for domestic oil prices to improve in Kazakhstan.
Due to the material reduction in world oil prices, which have fallen from around USD115 per barrel in July 2014 to around USD54 per barrel on Thursday, the company shut in all of its producing wells. The domestic oil price in Kazkahstan is lower than world oil prices, and the company said its operations were not profitable in the current market.
Jupiter's two producing wells, J-58 and J-59, are based on the Akkar East block.
"The company continues to monitor local pricing on an ongoing basis, and believes that production may recommence in first quarter of 2016 but is unable to give any guarantee that oil production will recommence in that timeframe," said the company.
The company plans to sit and wait as even a 40% reduction in operating costs has failed to make the operations economic. Jupiter said that 40% reduction has led to annual savings of around USD2 million.
The company also said the trial period for the two wells was initially thought to run for only a short period of time, which led it to rent the necessary equipment. However, Jupiter said the period will now be longer, partially due to the suspension of operations, and therefore the company wants to purchase the equipment needed rather than renting to save on costs.
"The challenge facing the company in the short term is that without additional funding, the purchase of the requisite topside equipment cannot proceed," said the company.
Jupiter said it has sufficient working capital at the moment but is considering its options for longer term funding that would allow it to resume drilling in late 2015 or 2016.
"Oil production has been shut-in and will remain so until such time that domestic oil pricing becomes cash flow positive. As outlined earlier in this report, the company believes that using a revised cost structure for the topside equipment, purchase rather than rent, and achieving increased oil production with the addition of wells J-58 and J-59, this should be possible by the first quarter of 2016," said Jupiter.
Those two additional wells are expected to be drilled before the end of 2015, but this is dependent on funding, but the company has asked for permission from the relevant authorities for this to be extended into 2016 in case there are further delays.
Jupiter Energy shares were down 5.7% to 12.50 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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