AWE hits Oi problems

Oi-1 fail: New well located to be drilled

Australia-listed AWE has hit difficulty setting casing at the Oi-1 well at PMP 38158 in the offshore Taranaki basin in New Zealand.

The company said they will drill a new well on the Oi prospect.

Oi-1 was drilled to a depth of 1507 metres when operational difficulties struck while the company was attempting to set casing.

Attempts to install cement plugs and sidetrack the well also failed.

The well was drilled using the semi-submersible Kan Tan IV drilling rig.

AWE and its joint venture partners have sealed and abandoned the Oi-1 well, while it is set to drill a new well nearby.

Joint venture partner New Zealand Oil & Gas announced the new well will be cased at 550 metres, rather than 1500 metres in the first well.

The company said this would allow drilling fluids systems to be established at a shallower depth.

Drilling is expected to take about 48 days to complete and will cost about $40 million.

AWE previously reported a pre-drill un-risked best estimate prospective resource of 11 million barrels of recoverable oil.

AWE is the operator of the well and holds a 31.25% interest, while NZOG holds 18.75% and Pan Pacific Petroleum holds 50%.

With costs blowouts at the Pateke well, AWE's current drilling programme is going to be an expensive one.

The company recently announced its gross pre-completion well cost had risen to $99 million, up from a pre-drill estimate of $55 million.

Completion costs are expected to come in at an extra $12 million.

The well also hit problems during drilling, with mechanical drill string difficulties forcing the bottom part of the hole to be abandoned.

It was not all bad news for the well as it struck positive results.

Amendment: The Pateke well has not yet started producing but is due to start sometime next year.

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