Northern Petroleum's production rises despite adverse weather in Canada

7th Jul 2016 12:21

(ShareCast News) - Northern Petroleum has increased its production despite the heavy rain in May and June due its Rainbow assets in Canada. The London based oil company said its net average production for the last week of June was about 500 barrels of oil per day, 100 barrels above target.Following the approval by the Alberta Energy Regulator, the company said its three wells from 9-25 battery are in production. Three further wells from the battery will also be bought into production after work on the pipeline.The first refund of an abandonment deposits from the annual equivalent rate of about $1.4m is due this month in instalments.The AIM listed company said production was restricted to 300 barrels of oil per day in May and June due to heavy rain which caused damage to roads and restricted trucking movements.Northern Petroleum said it was receiving a tariff for processing third party production through the 13-36 battery.The company bought 28,000 acres of mineral leases, wells, tank batteries and processing facilities, in the Rainbow area of north-west Alberta in January. The Rainbow assets are about 20km south of the its existing assets in Virgo.At the time of acquisition, production from the Rainbow assets was about 150 barrels of oil per day. From February to April, the company implemented a $1m programme to increase production to over 400 barrels of oil per day. With adjustments to the programme and a reduction in the cost environment, the company said the same production target was achieved with about $500,000.The company said it will focus on improving operating synergies and costs and increase production through the restart of three water-flood wells at the 9-25 facility in the Rainbow assets in the third quarter of the year.During the winter the company plans to recomplete the wells in the Virgo region. The company said it is considering not connecting them to the local infrastructure due to the lower sale price of Virgo oil, the third party tariff and now that it owns the processing facilities in Rainbow after the acquisition.Chief executive Keith Bush said: "The company has achieved its initial goal of increasing production from the Rainbow assets to more than 400 barrels of oil per day. This production, combined with the rise in oil price since February, is providing material monthly revenue and cashflow. The next step for the company is to increase production further and not only cover group costs, but also create net operating cashflow for future investment."The Rainbow assets have a broad range of development opportunities, including well workovers and side-tracks to increase production and pipeline and equipment enhancements, which can reduce operating costs and increase netback per barrel. The key aspect of these development opportunities is that they are relatively low risk and require relatively low levels of capital investment."Shares in Northern Petroleum rose 5.24% to 3.55p at 1325 BST.