Shemen Oil and Gas Resources Ltd. (TASE: SOG) announced last night that the well operator in the Shemen license had notified the company that measures taken in the Yam 3 well's borehole to deal with the high pressure, which had halted drilling in the upper gas-bearing strata, had been successfully completed. The operator notified its partners in the license that it will continue drilling using an alternative engineering layout, which the licensees have approved, in order to reach the well's primary target strata.
As a result in the delay in the timetable caused by the high pressures in the borehole and the engineering change, the licensees approved an updated budget for the well, which is expected to cost $138 million.
Shemen Oil has filed a claim with the insurance company, which insured the drilling, for compensation under the terms of the policy.
Shemen Oil's share of the well will be $111 million. The updated budget does not include the cost of production tests, if it is decided to carry them out. Drilling of the well began on December 3, 2012, and was estimated to take nine months, including the production tests.
Shemen Oil currently has $11 million in financial resources, after spending $73 million on the well. The company is examining several alternatives for increasing its financial resources to fund its $27 million share of the revised budget. The alternatives include the $4 million in current commitments by the company's parties at interest. The amount could be reduced if the insurance claim is accepted and the insurance company compensates Shemen Oil for the expenses to overcome the high pressure in the borehole.
Published by Globes [online], Israel business news - www.globes-online.com - on May 19, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013