Valeura Ready to Begin Turkish Appraisal Program

Valeura Energy, a Canadian junior producer with operations in Turkey, said August 8 it has started a long-term production test of its Yamalik-1 unconventional gas discovery, the first stage in the full appraisal of its basin centred gas accumulation (BCGA) play in the Thrace Basin.

Resource consultant DeGolyer & MacNaughton has estimated that Valeura’s BCGA lands hold some 10.1 trillion ft³ of working interest unrisked mean prospective resources of natural gas.

“I am very pleased to have our operations team back at work on the Yamalik-1 well, and look forward to seeing the results of our production testing in the coming weeks and months,” Valeura CEO Sean Guest said. “In addition, we have made great progress in preparing for the appraisal drilling program.”

Assuming a successful test at Yamalik-1, the well will be immediately completed and tied in to Valeura’s gas infrastructure, with production sold to its existing customers. The pipeline to facilitate that has already been completed and commissioned, to avoid any need to flare gas during the production test.

The first appraisal well in the BCGA program, Inanli-1, will be drilled to a depth of 5,000m from a location about six km northeast of Yamalik-1. It will test a region of the play thought to have more natural fracturing of the reservoir than the Yamalik-1 location, which could improve production potential.

A rig has been sourced, construction of the drilling pad has started, and Valeura expects to spud the well around the end of 3Q 2018. Drilling and casing of the well is expected to take 80 days, with results expected in the second half of 4Q 2018, and if the well is successful, it will be fracked and flow tested in 1Q 2019.

Equinor (formerly Statoil) will carry the full cost of drilling and testing Inanli-1, which will fulfill its earnings obligation under its farm-in agreement with Valeura reached two years ago. 

The second appraisal well, Devepinar-1, will be drilled from a location some 18 km west of Yamalik-1 in order to prove Valeura’s theory that the BCGA play is pervasive across the western margin of the Thrace Basin. Government permits for Devepinar-1, as well as for seven additional locations of potential sites for a third appraisal well, have been received, with timing of the additional wells to be determined based on results from Inanli-1 and the extended production test of Yamalik-1.

On the financial side, Guest said Valeura’s balance sheet remains in “excellent shape”, with enough working capital to fund its share of the BCGA appraisal drilling.

“Additionally, recent moves by Turkey’s regulators to again increase Turkish gas prices has offset weakening in the Turkish lira and continues to demonstrate that our selling price of natural gas in Turkey should remain approximately in line with European import prices,” he said. “This gives us more confidence than ever in the long-term value of our unconventional gas resources in Turkey.”

Oil and gas revenues in 2Q 2018 slipped to C$2.95mn (US$2.26mn) from C$3.47mn in 2Q 2017, reflecting lower production from Valeura’s conventional shallow gas assets. Natural gas production for the period averaged 4.36mn ft³/day, down from 5.07mn ft³/day a year earlier, while Valeura’s average realised gas price slipped to C$7.24/’000 ft³ from C$7.37/’000 ft³ in 2Q 2017.