Givot Olam Oil Exploration LP (TASE:GIVO.L), which is currently fracing (hydraulic fracturing) sections of its Meged 5 well and carrying out production tests, is seeking to cool investors' enthusiasm after yesterday's flare at the wellhead, which indicates the presence of fuel at the well. The scale of production, if any, is unknown, but the flare is a routine procedure during production tests.
In response to media reports, in a notice to the Tel Aviv Stock Exchange (TASE) today, Givot said, "The partnership wishes to reiterate that incorrect information was published yesterday about the flare at the well site." Givot investors throng the Meged 5 well site round-the-clock, and send e-mails to the media about events there.
Givot added, "We ask investors to attach no importance to flares or their extinguishment during the production tests, or to the strength of the flare, the number of containers going out of the wellhead, or any other circumstantial information. Investors should wait for an announcement about the results of the tests to obtain full and reliable information." In boldface, the notice concluded, "Beyond that, no importance should be given to said figures, as they are liable to mislead and lead to erroneous conclusions about the results of the tests."
A few months ago, Givot announced that production tests conducted during the summer produced an average of 382 barrels of oil a day. Fracing is now underway in sections 1-6 of the borehole to speed up the production rate, and production tests are underway of sections 7-8. Since the Israel Securities Authority set new reporting rules for oil and gas partnerships, Givot has made fewer announcements than it did during summer. It said that it will announce the final results of the production tests when they are completed.
Givot's notice today directly targets investors watching the work at Meged 5, whose hearts fill with joy when they see the flares lit and the containers entering and leaving the site. These investors send messages to the media about the height of the flares and believe that higher flares means greater oil production.
Givot sold 6,000 barrels of oil produced during last summer's production tests to Oil Refineries Ltd. (TASE:ORL) at the below market price of $60 per barrel. It cannot be ruled out that oil currently being produced is also being sold to Oil Refineries, and is why there are oil tankers at the wellhead. However, how much oil is being sold is not known.
A capital market source close to the matter told "Globes", "When you peel away all the conduct of the past year, Meged 5 ultimately has something real. The reserves report that they published provides a basis for making models and evaluations. As for the height of the flare, that is meaningless, pure and simple."
Givot's share price fell 2% by midday to NIS 0.10, giving a market cap of NIS 1.09 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on January 13, 2011
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