Global Energy wins attention

The shares are up 9 per cent to 94.5p today and should have further to run, with news flow expected to be stepped up in the weeks ahead. Global joined AIM in 2002 at a time when there were just 10 exploratory wells in Colombia, with 110 wells being worked on currently, the country has clearly attracted a great deal of new investment.

It has one of the largest 2P reserves on AIM (124.6 million boe) but the intention is to accelerate its efforts in realising their potential. The current production rate has been pegged back to less than 2,000 bopd but this is to allow Global the opportunity to reduce its water disposal costs.

Due to the loss of a third party vendor its water disposal bill has soared by 50 per cent, however it now plans to recommence production with lower water rates and investors that recall the un-commercial well drilled last year (Rio Verde 2) will be pleased to hear that it plans to use this abandoned well to dispose of water.

With transportation costs high, Global is focusing more effort at exploiting its Bocachico contract to the west of Colombia. Having previously encountered a flow rate of 400 bopd over 10 years ago the well was shut in, partly due to the prevailing oil price at the time but also due to the abundance of sand.

But, using a technique developed in Canada known as CHOPS (Cold Heavy Oil Production with Sand) it has engaged an oilfield service firm to explore the opportunity to re-enter the well. Using abrasives-tolerant pumps, CHOPS is well suited for heavy oil fields that produce sand, and has been proven to deliver 'substantial rate improvements'. So if successful it could lead to a good hike in oil production.

Global is also to target its energies on its Bolivar contracts. Back in 1998, it spent just shy of $30 million on two drilled wells which for a time were producing at an equivalent 20,000 bopd. Having researched and evaluated various seismic and formation images it plans to undertake a shale test in the Simiti formation. With ease of access to market, Global should be able to yield a substantial saving on what it is currently paying to transport oil from its Rio Verde operations (a large chunk of current production).

The Peru Block 95 license has been effectively farmed out to Canada listed major Gran Tierra Energy on a 60:40 basis, whereby the $15 million cost of the exploration well (scheduled to begin in the first quarter of 2012) will be met by Gran Tierra.