Heritage Discovery Disappoints Investors

Shares in Heritage Oil, the independent explorer, fell nearly 18 per cent in early trading on Wednesday after the company announced a large gas discovery in northern Iraq.

Investors had hoped that Heritage would find oil at the Miran West 2 well in the Kurdistan region. Instead, the upstream company reported that tests on the exploration well had indicated the presence of between 6,800bn and 9,100bn cubic feet of gas in the geological structure.

In the best case, the Miran West structure could have 12,300bn cubic feet of gas, translated into a risked level of 744m barrels of oil equivalent. The cumulative flow rate was estimated to be a healthy 75m cubic feet per day.

“The discovery of a major gas field of up to 12.3 trillion cubic feet in-place with exceptional flow rates makes this one of the largest gas fields to be discovered in Iraq,” said Tony Buckingham, chief executive of Heritage Oil.

“This well has substantially de-risked the field, so we have the confidence to accelerate the work programme on Miran. We are considering various development options including a tie-in to planned infrastructure that will achieve first production for both oil and gas in 2015.”

However, the announcement appeared to confirm investor fears about the complexity of the Miran West geological structure, which appears to be one of the largest gas fields in Iraq, but without a similar abundance of oil. Based upon tests of the Miran West 2 well, Heritage estimates that it contains between 53m and 75m barrels of oil.

Heritage added that it will begin drilling the Miran West 3 appraisal well in the second quarter of this year. A second rig will begin drilling in the autumn. Work on the Miran West-2 well has been suspended and it has been marked as a future producer.

Source: Wall Street Journal