Givot Olam Oil Exploration LP (TASE:GIVO.L) announced early today that water began to flow in the borehole of section 8 of its Meged 5 well and, "The partnership has decided to suspend activity at this stage. The partnership with the assistance of its advisors will reassess the situation and issue a separate announcement."
Givot's participating units price fell 32% in early trading to NIS 0.056.
Givot also reported that it "could not assess the effect of the hydraulic fracturing (frac) to boost output in sections 6 and 7 of the borehole, until the cleaning and pumping of all the liquids inserted during the fracing are completed." The company had been able to produce 382 barrels a day without the fracing, and hoped that this would boost output ten-fold, as is common around the world.
Givot added, "Although the tests conducted to date prove the presence of substantial quantities of oil in all the sections, at this stage the general partner cannot assess the possible effects of these statements on the production. The general partners also cannot assess at this stage their significance on the timetable and costs."
A capital market source said, "It's hard to understand this report. It's impossible to understand how significant it is. They were supposed to announce the findings… In principle, fracing can go wrong, but it's hard to know if that is the case here. They suspended operations for a month to bring in more equipment. They were supposed to issue a report about the halt in operations, but beyond that, this is impossible to figure out. This report conceals more than it reveals. Obviously, it's not good. The question is how bad it is. Is it permanently bad or temporarily bad? Time will tell."
Published by Globes [online], Israel business news - www.globes-online.com - on January 26, 2011
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