United Boosts Output in Egypt, Makes Cuts

London-listed United Oil & Gas seen its output in Egypt grow thanks to the completion of a new gas pipeline, it said in a stock filing on April 2. The company also announced spending cuts in response to the downturn.

United entered Egypt in February, wrapping up the purchase of a 22% stake in the producing Abu Sennan oil and gas concession from fellow UK player Rockhopper Exploration. United said a 10-km gas pipeline had been finished linking the concession's Al Jahraa field with the neighbouring KPC facility. Gas began flowing on March 22 and has ramped up to over 650 boe/d.

Previously this gas was flared. The pipeline's launch has helped lift overall production at the concession to around 8,400 boe/d, including 1,850 boe/d net to United, which is double the level a year ago. Output also grew as a result of the ASH-2 well coming on stream, which continues to flow more than 3,000 b/d of oil.

Abu Sennan boasts an operating cost of only $6.5/b, providing solid margins even at current low prices, United said. The company added that its pre-payment facility with BP also offered "downside price protection," effectively hedging some 6,600 barrels of oil each month.

Like others, United said it had taken steps to reduce its near-term capital expenditure. Deferrals in Italy means first gas will not arrive until the first half of 2021. It has also pushed back the drilling of two of the four wells it had planned to sink in Egypt this year.

United wants to divest non-core assets in the UK's Wessex basin, and has opted against exercising its farm-in option at Benin.

"We are focusing on investment which we believe will deliver the most immediate return for our business," CEO Brian Larkin said. "Where expenditure can be deferred with limited impact, we are doing so. Where expenditure or indeed where licences offer a more uncertain or marginal return, we are being prudent and stepping away."