23 Mar 2010 07:00
PetroNeft Resources plc
("PetroNeft" or the "Company")
Operational update
First production well spudded ahead of schedule
PetroNeft Resources plc (AIM: PTR) owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to provide an update on its operations.
Highlights:
·; First of nine production wells spudded 3 weeks ahead of schedule
·; Pipeline construction on schedule and within budget
·; Equipment procurement and mobilisation nearing completion
·; First year-round production scheduled for Q3
Production drilling
PetroNeft announces that the first of its nine planned production wells to be drilled in 2010 has been spudded at the Lineynoye oil field in Licence 61, approximately 3 weeks ahead of schedule.
The 2010 production drilling programme will involve the drilling of 9 wells from the current location utilising a rail-mounted production drilling rig designed to facilitate the drilling of multiple deviated wells with close spacing at the surface.
Once the first well is drilled and cased, the drilling rig will move five metres along its rails and immediately commence drilling the second well of the programme. This will be repeated for the third well, after which the rig will be skidded 15 metres to drill the fourth well while a workover rig completes the first three wells and installs electric submersible pumps ("ESPs"). Thereafter a fifteen metre skid will be inserted after the fifth and seventh wells to allow pairs of wells to be completed together, thereby optimising both the timing of wells coming on production and the size of the drilling pad.
All tubulars, supplies and consumables for the 9 well production drilling programme are also on site.
First production at the Lineynoye oil field remains scheduled for the third quarter of 2010.
Pipeline
Construction of the 60km pipeline from Lineynoye to Kiev-Eganskoye is progressing to plan. All of the pipe has been laid out along the route and construction of the pipeline is due for completion in mid April, well within the weather window required for this work. Final hydro-pressure testing of the line is scheduled for June 2010.
Field facilities
Most of the equipment required for construction of field facilities at Lineynoye has been procured and mobilised to location. This process should be complete by the end of March. Construction of these facilities has commenced and is due for completion in time to commence year-round production in the third quarter of 2010. The facilities include basic oil processing, oil storage, gas powered generation and communications systems as well as improved and enlarged crew accommodation and catering facilities.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:
"Thanks to the efficient and carefully synchronised planning of our infrastructure and drilling programmes and the commitment of our staff and contractors over the winter, all aspects of the Lineynoye Field development project are progressing on or ahead of schedule. Spudding of our first production well was an important milestone and boosts our confidence that we will commence year-round production in Q3 and achieve the initial target production of approximately 4,000 bopd by the end 2010."
For further information, contact:
| Dennis Francis, CEO, PetroNeft Resources plc | +1 713 988 2500 |
| Paul Dowling, CFO, PetroNeft Resources plc | +353 1 443 3720 |
| John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker)
| +353 1 679 6363 |
| Jeffrey Auld/Elijah Colby, Canaccord Adams Limited (Joint Broker)
| +44 207 050 6500 |
| Martin Jackson, Citigate Dewe Rogerson | +44 207 638 9571 |
| Joe Murray/Ed Micheau, Murray Consultants | +353 1 498 0300 |
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 on 27th September 2006.
The main asset of the Company is a 100% interest in Licence 61, 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. In December 2009 the Company announced the acquisition of a second oil and gas licence in the Tomsk Oblast in Russia, Licence 67.
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, using modern technology, 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:
| Proved reserves | (1P) | 10.2 million bbls |
| Proved and probable reserves | (2P) | 70.0 million bbls (P1+P2) |
| Proved, probable and possible reserves | (3P) | 529.4 million bbls (P1+P2+P3) |
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.