Dublin International Petroleum and SDX Energy are set for a fresh drilling campaign in Egypt after being granted a 10-year extension to agreements covering existing producing fields on the West Gharib block.
The global price of crude oil — currently riding comparatively high following almost a year of low prices amid the coronavirus pandemic — will play a factor in precisely how many wells the partners drill.
SDX revealed on Friday that Egyptian authorities had granted approval to extend the production service agreements over the Meseda and Rabul oilfields in the West Gharib concession until 9 November 2031.
With the extension in place, SDX chief executive Mark Reid revealed the company intends to drill up to twelve wells over the next three years in a bid to boost output to about 3000 barrels per day, with drilling to commence during the second quarter.
The drilling of 12 wells would see the joint venture meet its commitments under the terms of the extension, which require the drilling of six development wells and one water-injection well by the end of next year.
The joint venture will be required to drill four more development wells if the Brent oil price reaches $55 per barrel for 12 consecutive months, and a further two wells if Brent prices reach $60 per barrel for 12 consecutive months.
The current Brent price in early trade on Friday was $67.89 per barrel, with prices buoyed this week by the news Opec and its allies — in a grouping known as Opec+ — intended to extend production cuts.
Reid noted in Friday’s announcement that SDX’s current breakeven Brent oil price at the Meseda and Rabul oilfields was about $20 per barrel.
Under the terms of the PSA extensions, the joint venture has also agreed to pay a deferred signature bonus of $2 million, with a further contingent bonus of up to $2 million, depending on Brent oil prices.
Dublin International Petroleum operates the West Gharib Block in a 50:50 partnership with SDX.