The Iog PLC (LON: IOG) share price plunged 46.4% after issuing a corporate update about its anticipated Blythe H2 well. The well has been completed and handed over for final hook-up and commissioning (HUC) and is expected to start production later this month.
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Investors reacted negatively to the news that the new H2 well produced a maximum dry gas rate of 22.8 mmscf/d and 280-336 bbl/d condensate at the export pipeline pressure of 1250 psi, with no formation water observed. The well’s production was much lower than expected.
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The company was expecting the new Blythe H2 well to produce a gas rate of 30-40 mmscf/d, but the well has fallen short of the target by producing a maximum gas rate of 22.8 mmscf/d. However, the company thinks that there is a potential mechanical blockage downhole that is constraining the flow of gas in H2.
IOG intends to assess and rectify the potential blockage and is mobilising the right equipment for the job, which should be ready in the coming weeks. To complete the final hook-up and commissioning (HUC), the H2 well must be shut in for at least a week.
The company is also facing a significant challenge created by the drastic decline in natural gas prices that have dropped from a high of 214 p/therm in January this year to about 72 p/therm in May this year. The lower gas prices will impact the company’s revenues and profitability.
The firm will even shut down the H1 well once the H2 well comes onstream.
Rupert Newall, IOG’s CEO, commented: “The Blythe H2 well has tested at a maximum gas rate of 22.8 mmscf/d at the pipeline export pressure, appearing to be constrained by a suspected downhole mechanical blockage. H2 has been executed safely and efficiently considering that 34 days were lost to the well control event and remains on track to come onstream later this month following final hook-up and commissioning. Meanwhile, the Company has come under increased pressure from severe gas market volatility, with UK NBP Day-ahead gas prices falling by over 85% from August 2022 to June 2023.”
*This is not investment advice.
IOG share price.
The IOG share price plunged 46.36% to trade at 3.54p, from Tuesday’s closing price of 6.60p.
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