Shemen Oil receives $4.5m insurance payout for drilling suspension

High pressure in the Yam 3 borehole forced a new drilling plan, reinforce the borehole sealant, delaying work, and increasing the budget by $22 million.

Shemen Oil and Gas Resources Ltd. (TASE: SOG) today announced that it will receive a $4.5 million payment from the insurers of its Yam 3 well, offshore from Ashdod.

Shemen Oil and its partners have resumed drilling the Yam 3 well, after high pressure in the borehole at a depth of 3,550 meters forced the suspension of drilling in April. The high pressure forced the well operator to draw up a new drilling plan, reinforce the borehole sealant, which delayed work for a month, and increased the well's budget by $22 million to $138 million.

Shemen Oil filed an insurance claim, and the insurers have so far recognized a liability of $10.8 million out of the financial cost to the company. Under the terms of the policy, the company's share of the claim is $6.25 million, which means that the well's partners will receive $4.5 million.

Shemen Oil will show the insurers' claims adjusters more documents to obtain additional compensation, which if recognized, will allow it to receive full reimbursement, because it has already paid its participation share.

Published by Globes [online], Israel business news - www.globes-online.com - on July 1, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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