PTR.L Regulatory News (PTR)

23 Nov 2007 07:00

Petroneft Resources PLC23 November 2007 PetroNeft Resources plc Operational Update PetroNeft Resources plc ('PetroNeft' or 'the Company'), is pleased to providethis update on the progress of its operational activities on Licence 61, TomskOblast, Russian Federation. Highlights Drilling Programme and Reserves Report • Successful 2006/07 three well drilling programme: • Significant new discovery at West Lineynoye. • Confirmation of thick oil-filled pay columns of high quality oil in both of the existing fields; - Lineynoye confirmed with log, core and flow test data - Tungolskoye confirmed with log and core data - flow testing ongoing • Lowering the previously-believed Lineynoye oil/water contact by about 10 metres. • Tungolskoye No. 4 successfully side-tracked. Flow test temporarily suspended, due to mechanical faults, and will recommence in December when additional supplies can be transported to the rig site by winter road. • Full reserves review to be carried out by year end by Ryder Scott. Russian reserves for the Licence area are being simultaneously updated, with material increases anticipated from both processes. Development Planning and Pilot Production • Pilot production plan approved by Ministry of Industry and Energy of RF. • Export Pipeline Survey for engineering design and approvals is 80% complete. • Approval of tie-in to Transneft at Raskino pumping station has been received. • Electrical Submersible Pumps have now been installed in the Lineynoye No. 6 and No. 7 wells for pilot/long term test production this winter. • Ongoing discussions with international banks in relation to debt finance for the development of Licence 61. 2007/2008 Three Well Drilling Programme • New "turnkey" contract to drill two exploration wells, targeting over 50 million barrels of possible reserves, and a delineation well on the newly discovered West Lineynoye Field, commencing February/March 2008, has been agreed under favourable terms. Operational Overview Following the successful Lineynoye No. 6 delineation well and the West Lineynoyediscovery well (Lineynoye No. 7) the pilot production plan for Lineynoye hasbeen approved by the Ministry of Industry and Energy of RF and the Company hasbeen included in the Reporting Structure of Oil and Gas Producing Companies.This approval was necessary in order to commence pilot/long term productiontesting of the Lineynoye No. 6 and No. 7 wells this winter. Electricalsubmersible pumps have already been run in both wells utilising the drillingrigs currently at the well locations and test production will commence as soonas winter roads are in place to facilitate trucking the oil. It is planned tobe in pilot production throughout the winter months as long as the winter roadscan be kept open. The Tungolskoye No. 4 appraisal well (T-4), which has 15 metres of net oil paybased on the core data and independent log interpretations, has now beenside-tracked. The side-tracked well bore successfully penetrated the reservoirabout 100 metres to the east and 5 metres structurally higher than the verticalhole. However, we are still experiencing mechanical problems with the testingand need to mobilise additional equipment and supplies to the well site. Thetesting has been temporally suspended until winter roads are in place tocomplete the mobilisation, which should occur during December. After the T-4 well test data is available, independent consultants Ryder Scottwill complete their reassessment of the reserves on Licence 61. Simultaneously,we are in the process of updating the Russian Reserves on Licence 61. Finalreserves figures can not be determined until after Ryder Scott and the Russianexpertise reviews are completed, but it is anticipated that both will result insignificant increases to the Licence 61 reserves. This is expected to becompleted by year end. The pipeline survey to export oil from Licence 61 to Transneft at the Raskinopumping station is now approximately 80% complete. This survey includes all ofthe engineering design and approvals for the pipeline and custody transfer pointat Raskino. The Company received approval to tie-in at the Raskino pumpingstation in September 2007. Starting in February 2007 the Company commenced discussions with internationalbanks in relation to debt finance for the development of Licence 61. Thesediscussions are continuing based on the results from this years drilling andseismic programmes. 2007/2008 Exploration and Appraisal Programme A new "turnkey" contract has been entered into with Tomskburneftegaz LLC for thedrilling of three additional wells during the 2007/08 drilling season utilizingthe three existing drilling rigs that are currently on Licence 61. The totalvalue of the contract is about US$ 12 million. Vakha Alvievich Sobraliev, aDirector and significant shareholder of PetroNeft, is a principal ofTomskburneftegaz LLC and accordingly the contract constitutes a related partytransaction under Rule 13 of the AIM and IEX Rules. The Directors of PetroNeft(with the exception of Vakha Alvievich Sobraliev) consider, having consultedwith Davy, the Company's nominated adviser, that the terms of the contract arefair and reasonable insofar as the Company's shareholders are concerned. The results of this year's drilling programme, along with the seismic programmesundertaken over the last two years, have already been taken into account inplanning next year's three well drilling programme. This three well programme,which is expected to commence in February/March, will seek to further delineatethe newly discovered West Lineynoye Oil Field and to drill two low riskexploration prospects in the Tungolskoye-Lineynoye oil productive fairway.These two prospects, Korchegskaya and West Korchegskaya, are estimated tocontain about 50 million barrels of possible reserves. The necessary materials for these wells have already been moved to the Negotkastaging area by river barge and will be moved to the well locations as soon aswinter roads are in place commencing in December. The Company is also focused on expanding its operational footprint beyondLicence 61 and is currently evaluating a number of opportunities, which matchits skills and expertise. Dennis Francis, Chief Executive Officer of PetroNeft commented: "We are making good progress across the full spectrum of our projects and arepleased with the results. Over the last year we have added considerable value tothe company, both in terms of material reserves increases and preparing forproduction and positive cash flows. Whilst delays, particularly on the Tungolskoye No. 4 side-track, have impactedour schedule, the Company remains focused on its policy to expand the reservebase in Licence 61 and the development of existing reserves to early fullproduction. The three well drilling programme, pilot/long term production tests andcompletion of the field development plan, will make for a very active year in2008." For further information, contact: Dennis Francis, CEO, PetroNeft Resources plc (Houston)+1 713 988 2500 Paul Dowling, CFO, PetroNeft Resources plc (Dublin)+353 144 33720 Desmond Burke, Director Investor Relations, PetroNeft Resources plc (Ireland)+353 52 53226 John Frain/Brian Garrahy, Davy+353 1 679 6363 Damien Mauvais, Natixis Bleichroeder+44 207 220 5184 Nick Elwes/Paddy Blewer, College Hill (UK)+44 207 457 2020 The information contained in this announcement has been reviewed and verified byMr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for thepurposes of the Guidance Note for Mining, Oil and Gas Companies issued by theLondon Stock Exchange in March 2006. Mr. Francis holds a B.S. Degree inGeophysical Engineering and a M.S. Degree in Geology from the Colorado School ofMines. He has also graduated from the Harvard University Program for ManagementDevelopment. He is a member of the American Association of Petroleum Geologistsand the Society of Exploration Geophysicists. He has over 34 years experiencein oil and gas exploration and development. Forward Looking Statements This announcement contains forward-looking statements. These statements relateto the Company's future prospects, developments and business strategies.Forward-looking statements are identified by their use of terms and phrases suchas "believe", "could", "envisage", "potential" "estimate", "expect", "may", "will" or the negative of those, variations or comparable expressions, includingreferences to assumptions. The forward-looking statements in this announcement are based on currentexpectations and are subject to risks and uncertainties that could cause actualresults to differ materially from those expressed or implied by thosestatements. These forward-looking statements speak only as at the date of thisannouncement. This information is provided by RNS The company news service from the London Stock Exchange