Profitably operating mature fields is challenging both operationally and financially, a feat that PICO Cheiron Group is able to achieve thanks to its development expertise. Extending the production plateau at mature fields requires a new business model, one that the Group has refined in Egypt’s brownfield environment, and deploys across its international footprint. The Group’s growth model is built on successive operating cycles that rely on technical production capabilities and core commercial strength. Our growth cycle can be summarized as follows:
PICO Cheiron acquires carefully-selected mature assets — medium-size declining fields with upside potential and near-field exploration opportunities. The Group has been able to consistently grow its working interest production from 5 thousand boepd since its first to acquisition in 1990 to over 31 thousand boepd today. Going forward, PICO Cheiron’s expansion drive is intended to propel the Group towards becoming a major regional player in the oil and gas sector by doubling its size in terms of production within the next three years. In parallel, the Group is actively diversifying its asset base both geographically – with on the ground presence in Egypt, Mexico and Romania – and by product with increased exposure to natural gas to serve as a buffer during periods of oil price volatility.
The Group will continue to seek opportunities where it can deploy its particular brand of expertise.
At each of its fields, PICO Cheiron generates a technically and economically sound Field Development Plan (FDP) and applies a field-specific suite of advanced technology to reverse production decline and build reserves.
The company’s success is evidenced by its track record of uncovering new prospects — 97% success rate at new wells — and its ability to significantly increase production and reserve levels at each of its assets in the Gulf of Suez, an area that accounts for the majority of Egypt’s oil production and is considered among the world’s most geologically complex regions. Meanwhile, the Group’s most recent acquisitions in Egypt’s North Baharya and West Burullus regions have expanded its presence to two additional basins with different geological settings.
As the Group expands its geographical footprint into new regions, it will continue to leverage the strength and experience of its technical team to develop field-specific technologies and unlock value across its asset base.
A key determining factor for the Group’s success in profitably operating mature fields is the ability to build economies of scale and maintain significant production volumes with access to international markets. The company’s existing facilities in the Gulf of Suez, for example, allow low cost access to new reserves in the surrounding acreage. This “Plug and Produce” strategy means the Group is best positioned to capture growth opportunities in the Gulf of Suez, where it aims to build an integrated oil-gathering hub, maximizing on economies of scale by acquiring marginal fields in surrounding areas, as well as having access to international markets, via the Port of Suez and Suez Canal.
In parallel, the Group’s careful management of its internal cost structure and close coordination with its joint venture partners and government bodies allow it to operate free of the heavy overheads inherent in most of its competitors’ business models. This robust cost-management, alongside increasing production, allows the company to generate positive net income despite aggressive capital expenditure.
By carefully reinvesting its capital, the company maintains a healthy Reserve Replacement Ratio (RRR). Aggressive investment across assets and into new ventures is expected to raise total working interest production sharply in the coming years as the company consolidates its presence in Egypt and expands its operations across the region.