No oil at Yam 3

Despite finding signs of oil in preliminary tests last month, Shemen Oil announced today that Yam 3 is a dry hole.

Shemen Oil and Gas Resources Ltd. (TASE: SOG) announced after the market closed today that the Yam 3 well is a dry hole. Well operator Caspian Drilling Company Ltd. notified its partners in the well that production tests in two sections of the borehole found no oil.

Shemen Oil said that the production tests would be finalized only after the equipment is removed from the borehole, in line with the usual practice in the oil and gas exploration industry. "There is a small chance that there was a breakdown in the production tests in the upper sections of the borehole."

In September, Shemen Oil announced that there were signs of high quality oil at Yam 3, when the well reached its target strata at a depth of 5,700 meters.

Shemen Oil owns 77.7% of Yam 3, Zerah Oil And Gas Explorations LP (TASE: ZRAH) owns 7.15%, Zmiha Investment House Ltd. (TASE: TZMI) owns 5%, and Azerbaijan's Caspian Drilling Company owns 10%.

Shemen Oil and its partners invested $150 million in the Yam 3 well, and another $24.4 million in the production tests.

Seismic studies by Netherland Sewell & Associates Ltd. (NSAI) indicated a best estimate of 120 million barrels of oil in the license prospect, and a 36% chance of finding 1.8 trillion cubic feet of natural gas.

Shemen Oil raised NIS 120 million at a value of NIS 700 million in its IPO in in November 2011, well below the value it had hoped to achieve.

Shemen Oil chairman Gabi Ashkenazi, a former IDF chief of staff, and CEO Yossi Levy, the former CEO of Tamar partner Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) recently declined to exercise 605,000 warrants that had matured. They received the options at no cost. In a statement at the time, the company said, "Ashkenazi and Levy did not exercise the Series 4 warrants following an unequivocal legal opinion that they were party to inside information that was liable to influence their decision to make this purchase."

Published by Globes [online], Israel business news - - on October 13, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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