Beacon to cut costs under Erfelden poor show

Beacon Energy plc subsidiary plans to cut costs and open talks with its creditors as the Schwarzbach 2(3.) sidetrack well continues to perform below expectations in the Erfelden field, Hessen.

CHALLENGES

In early June, the electrical submersible pump (ESP) was producing intermittently with an apparent initial poor response from the reservoir.

The company today said that the well continued to clean-up with production anticipated at 50-100 bopd, lower than anticipated.

One likely cause is 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.

A second is poor permeability in the company’s operational area of Erfelden in the Lower PBS reservoir were likely responsible, added Beacon.

The company is reviewing options to stabilise and optimise production from the current well-bore as well as to exploit the assets’ resource potential, subject to funding.

Plans also include cutting costs to “right size” the cost base to expected production rates to maximise cash generation.

The company’s subsidiary Rhein Petroleum GmbH has no guarantees from its parent company.

Beacon said it was unlikely to publish its 2023 annual report by 30 June because of the uncertainties, including the impact on assets impairment and as a going concern.

It will likely suspend trading from 1 July, pending publication of the annual report.

Incoming chief executive Stewart MacDonald added that the sidetrack’s performance was “hugely disappointing”.

“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.”