15 May 2012 07:00
15 May 2012
JKX Oil & Gas plc
INTERIM MANAGEMENT STATEMENT
Highlights
·; Completion of Gas Plant at the Koshekhablskoye field in Russia and initiation of gas sales
·; Award of 170.7 sq km Giorgievskoye exploration licence in Adygea, southern Russia
·; Successful exploration well Z-04 in the Zaplavskoye exploration licence in Poltava, Ukraine
·; Commencement of production from the Elizavetovskoye licence in Poltava, Ukraine
·; Completion of tender for multi-stage frac at Rudenkovskoye field in Ukraine, with the contractor scheduled to start operations in the third quarter.
Q1 Q1 Change
2012 2011
Production (boepd) 7,330 8,910 -17.7%
Gas Production (MMcfd) 33.6 40.0 -16.0%
Oil Production (bopd) 1,725 2,246 -23.2%
Realised gas price ($ per Mcf) $12.41 $8.25 +50.4%
Realised oil price ($ per barrel) $99.80 $92.29 +8.1%
Realised LPG price ($ per tonne) $848 N/A N/A
JKX Chief Executive, Dr Paul Davies, said:
"The start-up of our Russian project has been the focus of the early part of 2012 and I am pleased to report that we have begun delivery of gas. We anticipate ramping-up production through the mid-year. We have also been awarded the adjacent Giorgievskoye exploration licence, part of which surrounds our Koshekhablskoye production licence.
"The first exploration well on the recently awarded extension to the Zaplavskoye licence in Ukraine was drilled with encouraging results and is being followed-up with additional 3-D seismic acquisition in the second half of the year. Additionally, we have initiated production from our Elizavetovskoye licence in Ukraine.
"We continue to benefit from buoyant oil, gas and LPG prices in Ukraine and anticipate improving revenues in the second quarter with increased production from Hungary and the addition of production from Russia."
For further information please contact:
Anthony Cardew / Nadja Vetter / Alexandra Stoneham, Cardew Group T: 020 7930 0777
Production
Ukraine: Average production in the first quarter was 7,000 boepd comprising 32.0 MMcfd of gas and 1,674 bpd of oil and condensate, with LPG sales averaging 56.5 tons per day.
Hungary: Gross production from the Hajdunanas Field in the first quarter was 661 boepd comprising 3.3 MMcfd of gas and 103 bpd of oil and condensate (JKX share: 50%). Only the Hn-2 well was in full production during the period with a two week test of Hn-1 providing some additional oil..
Russia: Gas sales commenced in Q2 (April).
Outlook: We anticipate average production in the second quarter to be approximately 8,500 boepd.
Ukraine
Development and Workover Activity: First quarter drilling activity was exploration and appraisal orientated with workover activity focused on adding production from existing wells. One appraisal well and one exploration well were completed with a second appraisal well nearing completion. Two wells were worked-over in the period.
Well M-172 was an appraisal to the successful M-170 "wedge zone" deep Devonian sandstone gas discovery in the Molchanovskoye licence and was drilled some 500m to the southwest with a TD of 3,203m. Despite encountering the target approximately 200m above the gas water contact in the discovery well, the reservoir was water bearing. This result is attributed to an unseen fault between the wells. Seismic data are being reprocessed in anticipation of further appraisal in the area.
Exploration well Z-04 was drilled to a TD of 2,937m in the northwest part of the Zaplavskoye licence area and encountered gas in the V-25 and V-26 sandstone reservoirs. The V-25 reservoir was over- pressured and was completed first. Initial rates exceeded 20 MMcfd with a rich condensate and LPG content but, as anticipated, the rates declined rapidly. Plans are underway to re-complete in the V-26 sandstone reservoir in the second quarter.
The Skytop rig relocated to the west flank of the Ignatovskoye structure to drill appraisal well IG-135, a high-angle well targeting a down-faulted Visean carbonate reservoir. The target reservoir proved tight but a completion in the upper Visean carbonate is now flowing at 250 bopd with 0.45 MMcfd of gas through a 1 5/8-inch choke with a FWHP of 181 psi.
The next development well in the schedule is well NN-78 in the NovoNikolaevskoye field. The rig will then relocate to the Rudenkovskoye field for preparatory work for the forthcoming frac operations. Planning and logistics for the multi-stage frac of the long horizontal well R-103 are well under way with the contractor, when appointed, scheduled to start operations in the third quarter.
The TW-100 workover rig embarked on a lengthy fishing job to prepare Rudenkovskoye well R-102 for additional perforations in the Tournasian sandstone. Following perforation, there was a small increase in gas rate but insufficient to sustain production. The well has been suspended pending the results of the R-103 frac. Water shut-off and recompletion of the Devonian sandstone in the Molchanovskoye M-168 well was partially successful with flow rates reaching 1.05 MMcfd before dropping off sharply suggesting cross-flow; the well has been placed on intermittent production. In April, the rig performed a workover on the rod pump system in well IG-105, replacing rods and cleaning up the tubing. The well is again flowing at around 125 bopd with a 35% water cut. The rig has since moved to well IG-150 where it is carrying out a water shut-off and recompletion operation in the Devonian sandstone reservoir.
Facilities: Operations at the main production facility and the LPG plant continued smoothly through the period. Work continues on debottlenecking the plant, re-routing flowlines to reduce back pressure, and wax clearance to enhance production from the available well stock. A major overhaul of the K-220 compressor to handle lower inlet pressures will be carried out in the third quarter.
Exploration: Following the success of well Z-04, additional 3D seismic in this part of the Zaplavskoye licence area will be acquired in the third quarter.
Elizavetovskoye Licence: Agreement to start production from the M-53 well on the Elizavetovskoye licence was concluded in the period and testing of the well commenced in April. Following a successful test reaching 3.8 MMcfd, the well has been put into production on a smaller choke and is currently averaging 2.9 MMcfd. JKX is the sole licence holder and receives 33.3% of the production under a Joint Production Agreement for the wells which were drilled by the previous licence holder. This test data will prove invaluable ahead of any further drilling on the licence.
Russia
Development and Workover Activity: Work began in the period to bring wells 20, 27 and 25 into production in readiness for the Gas Processing Facility ("GPF") start-up. Well 20 is now producing to the GPF and debottlenecking is in progress. The next well scheduled for production is well 27 where the completion is currently being re-run following difficulties in removing the temporary plug after the extended shut-in period. As reported previously, testing of well 25 indicated a partial blockage downhole and a further side-track is now planned at the end of the second quarter.
The Geostream rig will return to complete operations on Callovian wells 9 and 22 once operations on wells 27 and 25 are complete.
Facilities: Commissioning of the GPF was completed in the first quarter with gas in the plant. Sales gas has been flowing to the Gazprom network since mid-April as part of the plant acceptance procedures. All regulatory inspections and approvals have been formally concluded this month. The Permit to Operate is anticipated in the second quarter, in parallel with increasing production to plant design capacity.
Exploration: The Company was awarded the 170.7 sq km Giorgievskoye exploration licence in May. The largest part of the licence lies adjacent to, and immediately south, of the Koshekhablskoye production licence but a significant part of it also runs to the northwest of the Koshekhablskoye field as well as covering the west and east flanks of the field.
The whole of the mapped field area is now secured under licences held by the Company. Most of the Oxfordian 2P reserves in the new licence area were already expected to be recoverable through existing wells on the field, but a further 30-90 Bcf of contingent Oxfordian gas resources could be recovered by additional drilling, together with a total 140-180 Bcf of Callovian gas resources. There is also an additional lead in the south of the block, beyond the existing 3D seismic coverage, with estimated P50 gas resources of 30 Bcf unrisked.
Hungary
Development Activity: The Hadjunanas and Gorbehaza fields (JKX: 50%) produce from three wells to a single separator, and then via a 14.5 km export line to an existing facility for input to the Hungarian gas pipeline system. Production last year was affected by water influx and the operator temporarily shut-in both fields. Well Hn-2 was in production throughout the first quarter averaging 3.3 MMcfd with 68 bcpd (gross). Well Hn-1 has been recompleted as a Miocene oil producer and new separation facilities are being installed with start-up expected in the second quarter.
Exploration: Hernad licences: JKX holds a 50% equity interest in the two Hernad licences in the northern Pannonian Basin. The 2011 3D seismic data acquisition in the Jaszsag area in the south of the Hernad II licence was interpreted and a two well drilling programme planned for the end of 2011. The first well, Pely-02, was unsuccessful and drilling at the second location was deferred while the data was re-evaluated. A tilted fault block structure with amplitude supported Lower Pannonian reservoir intervals lies up-dip from the Tiszavasvari-6 well discovery and appraisal drilling is planned for the second half of 2012
Veszto licence: JKX holds a 25% equity interest in a 15.6 sq km part of the Veszto exploration licence in the east Hungarian Pannonian Basin. The operator is continuing the evaluation of appraisal locations and a further well is under consideration for the second half of 2012, following award of the Mining Plot.
Turkeve area: Exploration well Ny-7 (JKX: 50%) made asignificant gas discovery in the Turkeve area in 2011. However, the proportion of CO2 (25%) requires a more complex treatment plant. The operator is evaluating treatment and development options with the aim of bringing the field into production at the end of 2012.
Bulgaria
Exploration: The B1 Golitza licence, in which JKX held a 40% interest, expired in March 2012.
JKX has a 18% carried interest in the 1,787 sq km Provadia licence operated by Overgas. The 380 km 2D seismic survey has been completed and the data are now being evaluated.
Slovakia
Exploration: JKX holds a 25% equity interest in the Svidnik, Medzilaborce and Snina exploration licences in the Carpathian fold belt in north east Slovakia. The Cierne-1 exploration well location in the westernmost Svidnik licence has been selected. The well will be drilled to more than 3,500m with a number of additional targets identified in this sub-thrust play. Spud date is not now expected until early 2013.
ENDS