(Sharecast News) - Oil and gas exploration and production company Enwell Energy updated the market on its activities in Ukraine on Tuesday, reporting that overall production volumes in the third quarter increased around 19% year-on-year.
The AIM-traded firm said that was a "continued consequence" of the boost in May from the SV-54 well in the Svyrydivske (SV) field beginning production testing.
However, a decline in production rates from the VAS-10 well in the later part of 2019 impacted overall production at the Vasyschevskoye (VAS) field.
As a result, during the first quarter, compression equipment was installed to stabilise production from the VAS-10 well, with a longer-term plan to undertake a workover of the well to access an alternative reservoir horizon.
At the Mekhediviska-Golotvshinska (MEX-GOL) and SV fields, the drilling of the SV-25 well was continuing, with the well having reached a depth of around 4,875 metres.
The well had a target depth of 5,320 metres, with drilling operations scheduled to complete by the end of the first quarter of 2021, and, subject to successful testing, production hook-up during the second quarter.
Enwell said it was an appraisal well, with its primary targets being the B-20, B-22 and B-23 horizons in the Visean formation.
In addition, planning was progressing for a further well, and the possible sidetracking of an existing well in the SV field in 2021.
At the VAS field, the board said planning was continuing for a new well to explore the Vvdenska (VED) prospect within the VAS licence area.
Enwell also updated shareholders on the Arkona legal dispute, which arose following its acquisition of Arkona Gas-Energy, which holds the Svystunivsko-Chervonolutskyi (SC) exploration licence.
It said there were legal proceedings between NJSC Ukrnafta as claimant and Arkona as defendant, in which NJSC Ukrnafta made claims asserting that "irregular procedures" were followed in the grant of the licence to Arkona in May 2017.
NJSC Ukrnafta was the holder of a previous licence over the area, which expired prior to the grant of the licence, with Arkona disputing its claims.
The board explained that in early July, the First Instance Court in Ukraine made a ruling in favour of NJSC Ukrnafta, determining that the grant of the licence was irregular, and as a result, the licence would be invalid.
However, in early August, Arkona filed an appeal of that decision in the Appellate Administrative Court in Kyiv, and pending the hearing of that appeal, the licence remained valid.
At a hearing of the appeal on 29 September, the Appellate Administrative Court ruled in favour of Arkona, overturning the earlier decision of the First Instance Court.
Enwell also said it did not have any further information around the order for suspension over the VAS field production licence, other than that the legal proceedings to challenge the validity of the order were ongoing.
The company said it was confident that it would ultimately be successful.
At 30 September, the firm's cash resources stood at $55.7m, comprising $15.8m equivalent in Ukrainian hryvnia and the balance of $39.9m equivalent in a combination of dollars, sterling and euro.
Enwell said it was monitoring the "evolving situation" relating to the Covid-19 pandemic, and to take steps to protect its staff and operations.
However, it said that thus far there had been no operational disruption linked to the pandemic, and no material impact was currently expected for the group.
"We are pleased with the continued progress with the development of our fields, where we are seeing strong production, albeit in a lower gas price environment than 2019," said chief executive officer Sergii Glazunov.
"We are also pleased with progress in the drilling of the SV-25 well, which we hope will continue our success in the development of our fields.
"We are closely monitoring the unprecedented developments of the ongoing Covid-19 pandemic, and although we have not experienced any material impact on our operations so far, we have taken and will continue to take action to ensure the safety of our employees and local communities."
At 0908 BST, shares in Enwell Energy were up 9.5% at 16.07p.
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