REG - Beacon Energy PLC - Erfelden Operational Update

Beacon EnergyAnnouncement

24/06/2024 08:00

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RNS Number : 5621T  Beacon Energy PLC  24 June 2024

24 June 2024

Beacon Energy plc

("Beacon Energy" or the "Company")

Erfelden Operational Update

 

 

Beacon Energy (AIM:BCE), the full-cycle oil and gas company with a portfolio
of onshore German assets through its wholly-owned subsidiary, Rhein Petroleum
GmbH ("Rhein Petroleum"), provides the following operational and corporate
update in relation to the Schwarzbach 2(3.) sidetrack well ("SCHB-2
sidetrack") in the Erfelden field.

 

•     Following demobilisation of the rig, the SCHB-2 well was
reconnected to the Schwarzbach production facilities on 12 June 2024 to
restart production, allow the well to clean-up and allow a long-term flow rate
to be established.

 

•     The well continues to clean-up and while a stabilised rate has yet
to be achieved, it is anticipated from pressure data and reservoir inflow that
production is likely to stabilise in the 50 - 100 barrels of oil per day
("bopd") range.

 

•     Production at this level is substantially lower than expected
based on the electronic logs obtained while drilling both the original well in
Q3 2023 and the sidetrack in May 2024.

 

•     The most likely explanation for the poor performance is a
combination of residual reservoir damage in the upper section of the Upper PBS
reservoir (where the sidetrack remains close to the original well bore which
was invaded with drilling fluids) and poor permeability in this particular
area of the Erfelden field in the Lower PBS reservoir.

 

•     The Company continues to review options to stabilise and optimise
production from the current well-bore as well as reviewing longer-term options
to exploit the resource potential of the assets (subject to funding).

 

The Company will now look to implement a material cost reduction program aimed
at right-sizing the cost base to the expected go-forward production rates to
maximise cash flow generation.

 

The Company will also look to commence discussions with the creditors of Rhein
Petroleum. It should be noted that Beacon Energy has not provided any parent
company guarantees related to the debts of Rhein Petroleum.

 

As a result of the current uncertainties outlined above and the uncertain
impact on assets impairment and going concern in the accounts, the Company is
unlikely to be in a position to finalise and publish its Annual Report for the
year to 31 December 2023 ("Annual Report") by 30 June 2024, as stipulated by
Rule 19 of the AIM Rules for Companies (the "AIM Rules"). The Company is
targeting the publication of the Annual Report as soon as practically
possible.

 

As a result, trading in the Company's ordinary shares on AIM will likely have
to be suspended with effect from 07:30 a.m. on 1 July 2024 pending publication
of the Annual Report. It is expected that suspension from trading will be
lifted with the publication of the Annual Report.

 

Notwithstanding the temporary suspension of trading in the Company's ordinary
shares, the Company will continue to make announcements as and when there are
any developments that require announcement in accordance with its obligations
under the AIM Rules.

 

Stewart MacDonald, Incoming CEO of the Company, said:

"While a stabilised flow rate has yet to be achieved, it is likely that
production from the SCHB2 well will be in the 50 - 100 bopd range, materially
below expectations. This is a hugely disappointing outcome for all
stakeholders given the very encouraging results obtained from the electronic
logs.

 

The likely stabilised production rate indicates we have been extremely unlucky
with the challenges encountered in the original well and our technical team
are working diligently to understand these results against the reservoir
characteristics derived from the electronic logs obtained.

 

The Company will now look at a range of options to reduce costs within the
business, maximise cash generation and assess next steps."

 

The Company plans to release a short presentation webcast on its website later
today.

 

Enquiries:

 Beacon Energy plc                                          +44 (0)20 7466 5000

 Stewart MacDonald (CEO)
 Strand Hanson Limited (Financial and Nominated Adviser)    +44 (0)20 7409 3494

 Rory Murphy / James Bellman
                                                            +44 (0)20 7466 5000

 Buchanan (Public Relations)

 Ben Romney / Barry Archer / George Pope
                                                                 +44 (0)20 7186 9030

 Tennyson Securities Limited (Broker)

 Peter Krens / Ed Haig-Thomas

 

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