PTR.L Regulatory News (PTR)

15 Oct 2009 07:00

15 October 2009

PetroNeft Resources plc ("PetroNeft" or the "Company")

Operational update

PetroNeft Resources plc ('PetroNeft' or 'the Company'), owner and operator of Licence 61, Tomsk Oblast, Russian Federation, is pleased to provide an update on its operations. 

Highlights

Pipeline construction contract signed and on budget

Pipe currently being moved by barge

Development drilling tenders under evaluation

PetroNeft has signed a contract for the construction of a pipeline from its Lineynoye oil field to the Kiev-Eganskoye oil field. It is a fixed price contract and is within budget estimates. The contractor will move their equipment to the field over the coming months and construction is scheduled to commence in January 2010. 

The pipe is currently being transported by barge from its storage location to a staging point south of Licence 61. This relocation should be completed within the next few weeks. 

The field survey of the revised southern pipeline route has commenced and it is now expected that the route will be approximately 60 kilometres long as opposed to the previous 70 kilometre estimate, which included a contingency. The shorter route means that no additional pipe will now need to be acquired.

Tenders for the drilling of 9 development wells in 2010 have been received and are currently being evaluated. Initial indications are that drilling costs will also be within budget estimates. A contract is expected to be awarded and signed in the coming weeks. 

Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:

"The hard work undertaken over the past year to optimise the development plan for the Lineynoye oil fields is now coming to fruition. Operationally everything is on schedule and on budget to achieve the major milestone of year-round production in the third quarter of 2010."

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Forward Looking Statements

This announcement contains forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement.

Notes to Editors

PetroNeft Resources plc was established in 2005 to develop oil and gas assets in Russia and the Former Soviet Union and was admitted to the London AIM and Dublin IEX Markets in September 2006.

The main asset of the Company is a 100% interest in a 4,991 sq km oil and gas licence in the Tomsk Oblast in Russia, held through its wholly owned Russian subsidiary, Stimul-T. The Licence is located in the prolific Western Siberian Oil and Gas Basin and contains four known oil fields, Lineynoye, Tungolskoye, West Lineynoye and Kondrashevskoye, and over 25 exploration Prospects and Leads.

The Board and Management of PetroNeft is made up of highly experienced professionals, including former Marathon Oil Company executives, in the International and Russian Oil Exploration and Development business. The Russian Management team also has extensive local knowledge and experience in the exploration and development of oil and gas fields in the Tomsk Oblast. 

Since acquiring Licence 61 in May 2005, the Company has carried out extensive reprocessing and reinterpretation of over 2,500 line kms of vintage seismic acquired in Soviet times. It has also digitised and reinterpreted the logs of 14 wells drilled on the Licence since 1972. PetroNeft also has acquired over 1,000 line kms of new CDP-2D infill seismic and drilled six new exploration/delineation wells. This new seismic and six well drilling programme fully satisfied the exploration work obligation for the full 25 year licence term.

Reserve estimates on Licence 61 prepared by Ryder Scott as of 31 December 2008 were: 

PetroNeft has also recently announced a crude oil transportation agreement with Nord Imperial, effective for 25 years, which significantly reduces the various permits and associated approvals required for pipeline construction as well as the costs. The new route, from Lineynoye to Kiev-Eganskoye runs adjacent to the Tungolskoye and Kondrashevskoye oil fields and will create useful synergies for future development phases.

On 21 September 2009 PetroNeft announced a US$27.5 million fund raising from international institutional investors which fully funds the Phase 1 Development Plan for the Lineynoye and West Lineynoye Fields. PetroNeft expects to have year-round production from the Licence in the third quarter of 2010 with production of 4,000 bopd by the end of 2010. Production from the Phase 1 project is expected to peak at around 12,000 bopd in 2012.