15 Apr 2010 07:00
PetroNeft Resources plc
("PetroNeft" or the "Company")
Operations Update
Positive result from first production well, pipeline substantially complete
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 production well meets expectations
·; Pipeline construction substantially complete
·; Construction of production facilities on schedule
·; Winter phase mobilisation for Arbuzovskaya exploration well complete
·; Ryder Scott 2009 Reserve Report finalised
Development Drilling
Drilling of the first of 9 production wells at the Lineynoye oil field scheduled for 2010 has now been completed. Preliminary results of the log and survey data indicate that the results of this well are in line with expectations. The top of the reservoir section was penetrated at 2,391m vertical depth subsea. The J1 reservoir interval is completely saturated with oil. The gross hydrocarbon interval in the well is 14.2m and the preliminary log analysis shows net oil pay is between 10.2m and 11.8m. Production casing will be run in the well and cemented, following which the production drilling rig will be skidded to drill the second well. An electrical submersible pump will be installed in the well with a work-over rig later in the programme.
Pipeline Construction
The 60km export pipeline from the Lineynoye field to the Kiev-Eganskoye field is progressing on schedule. All activities required to be completed during the winter construction season have been completed. These included the route clearance, field-welding of the pipeline, wrapping, trenching, laying the pipe and backfilling the trench for the entire 60km pipeline. Remaining activities include the connection of the pipeline to facilities at Lineynoye and Kiev-Eganskoye, which are not dependent on winter roads. The hydro test of the pipeline is scheduled for June 2010 following which the pipeline will be ready to receive first production in the third quarter of 2010.
Production Facilities
Mobilisation of all the major equipment for the production facilities that were required to be moved to Lineynoye by winter roads has been completed. Construction of production facilities continues and is on schedule to be completed for first production in the third quarter of 2010.
Arbuzovskaya Exploration Well
The drilling rig, camp and necessary materials to drill the Arbuzovskaya Exploration well have successfully been mobilised to location during the winter season. Rig-up operations are planned to commence by September 2010 and drilling will commence in October after the 2010 nine well production drilling programme has been completed. This is the first of at least three exploration/delineation wells to be drilled in the northern part of Licence 61 in 2010 and 2011. This programme has the potential to materially increase both Group reserves and the long term production potential of Licence 61.
Ryder Scott 2009 Report
The reserve report prepared for year end 2009 has been completed by Ryder Scott and is now available on the PetroNeft website (www.petroneft.com). The results are summarised in the following table. The reserves are essentially the same as last year because there was no new drilling in 2009. However, the net present values have improved significantly, primarily due to reduced capex and higher oil prices.
| Oil Field and Prospect Type | Proved | Proved and probable | NPV10 of 2P reserves | Proved, probable and possible |
|
| 1P | 2P | Base case* | 3P |
|
| mmbo | mmbo | US$ million | mmbo |
| Lineynoye field | 5.69 | 23.88 | $192.32 | 29.82 |
| West Lineynoye field | 2.71 | 23.32 | $112.45 | 29.19 |
| Kondrashevskoye field | 0.61 | 8.12 | $31.05 | 26.11 |
| Tungolskoye field | 1.38 | 15.51 | $99.98 | 19.66 |
| Total | 10.40 | 70.84 | $435.80 | 104.78 |
| Upper Jurassic - 24 prospects |
|
|
| 207.29 |
| Cretaceous - 10 prospects |
|
|
| 156.17 |
| Lower to Middle Jurassic - 11 prospects |
|
|
| 63.06 |
| Total | 10.40 | 70.84 | $435.80 | 531.29 |
|
|
|
|
|
|
| * Other NPVs, cases and the various assumptions used are detailed in the Ryder Scott Report (PETROLEUM CONSULTANTS REPORT FOR 2009) available on www.petroneft.com | ||||
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented:
"The completion of winter pipeline construction represents a critical milestone in our schedule to commence year round production in the third quarter of this year. We are also delighted that the preliminary results from the first production well are in line with our expectations and look forward to the remainder of the programme with confidence and optimism."
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 |
The information contained in this announcement has been reviewed and verified by Mr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for the purposes of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in March 2006. Mr. Francis holds a B.S. Degree in Geophysical Engineering and a M.S. Degree in Geology from the Colorado School of Mines. He has also graduated from the Harvard University Program for Management Development. He is a member of the American Association of Petroleum Geologists and the Society of Exploration Geophysicists. He has over 35 years experience in oil and gas exploration and development.
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 1 January 2010 were:
| Proved reserves | (1P) | 10.4 million bbls |
| Proved and probable reserves | (2P) | 70.8 million bbls (P1+P2) |
| Proved, probable and possible reserves | (3P) | 531.3 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.