23 Jun 2010 07:00
PetroNeft Resources plc
("PetroNeft" or the "Company")
Operations Update
Pipeline testing complete, fourth production well successfully drilled
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:
·; Pipeline pressure testing successfully completed
·; Fourth production well successfully drilled
·; Construction of production facilities on schedule
·; Arbuzovskaya exploration well site preparations substantially complete.
Pipeline Construction
Hydro-static pressure testing of the pipeline has been completed on schedule. The 60 km pipeline was successfully tested to design pressure which is twice the normal operating pressure. The water used in the testing procedure will now be removed from the pipeline in preparation for the commencement of oil production.
Development Drilling
Drilling of the fourth of nine production wells at the Lineynoye oil field has now been completed ahead of schedule. Preliminary log and survey data indicate that this well has the highest quality reservoir and net pay characteristics encountered to date in the development programme.
| Well No. | Top of reservoir vertical depth subsea metres | Gross hydrocarbon interval metres | Net oil pay metres | Comments |
|
113 |
2,396 |
17.6 |
14.6 | Interval is completely saturated with oil. |
Production casing will now be run in well No. 113 and cemented. The drilling rig will then be moved along its rails and drilling of the fifth well, No. 114, will commence shortly. A work-over rig is continuing the process of perforating and installing electrical submersible pumps in wells 109, 110, 112 and 113.
Production Facilities
Construction of production facilities continues and is on schedule to be completed for first oil production in the third quarter of 2010.
Arbuzovskaya Exploration Well
Rig-up operations for the Arbuzovskaya exploration well are substantially complete and drilling is scheduled to commence in October after the 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.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented:
"Successful completion of pipeline testing is another major milestone and construction of production facilities remains on schedule. We are very encouraged by the result of the latest production well which is the best drilled so far and look forward to achieving first production in the third quarter and our year-end production target of 4,000 bopd"
For further information, contact:
| Dennis Francis, CEO, PetroNeft Resources plc | +353 1 443 3720 |
| Paul Dowling, CFO, PetroNeft Resources plc | +353 1 443 3720 |
| John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker)
| +353 1 679 6363 |
| 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 ESM 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 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.
On 28 May 2010, PetroNeft announced a US$30 million debt facility with Macquarie Bank.