Seven Heads difficulties eat into Ramco value

Aberdeen-based Ramco shed 60 per cent of its value on London's Alternative Investment Market yesterday after raising doubts over the level of gas reserves within its Seven Heads field off the coast of Cork.

Ramco's shares closed at 38p last night, having collapsed from levels around 400p at the end of January when problems with Seven Heads first emerged.

The firm, with an 86.5 per cent interest in Seven Heads, said yesterday it was postponing its 2003 results until early May to complete "an initial reassessment" of the gas reserves held in the field.

Ramco began production at the field, its primary asset, at the end of last year and is committed under contract to selling on 60 cubic feet of gas every day to German group Innogy. It produces less than 40 cubic feet of gas.

The deal with Innogy has a seven-year term, but the level of gas to be sold will be open to renegotiation in October. Until then, Ramco will satisfy its obligation to Innogy by importing gas from Scotland through the interconnector.

When the firm first said it was unable to meet its production target in January, it had suggested that a build-up of water in the wells could be to blame. Further inquiries have eliminated this theory, leading Ramco to suspect that "each well is connected to a lower volume of reserves than had been expected".

"Our understanding of what is a significantly more complex reservoir than we had thought now requires a fundamental reappraisal," it said in a statement.

While it investigates the reserves level, Ramco will also look at gaining access to compression facilities on the neighbouring Kinsale platform that could help production at Seven Heads. Mr Dan Stover, Ramco's chief operator, yesterday dismissed suggestions that the Seven Heads problem could limit the firm's viability describing it simply as "disappointing".