24 Aug 2010 07:00
PetroNeft Resources plc
("PetroNeft" or the "Company")
Production Commences in Licence 61
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 at Licence 61.
Highlights:
·; Year-round production commenced on Licence 61 in Tomsk Oblast
·; Production of 4,000 bopd expected by end 2010
·; Seventh production well encounters thickest net oil pay to date
First Oil
Construction of production facilities has been completed and production has gradually been commenced from four wells. Field production has been 1,100 bbls of oil in the first two days of production and flow rates are expected to increase as drilling fluids are cleared out and the electric submersible pumps are optimised. Three additional wells will be brought on production over the coming week.
Eleven wells are scheduled to be on production at the end of the year and we anticipate meeting our year-end production target of 4,000 bopd. In January 2011, when a crew can be mobilised on winter roads, a programme of hydraulic fracture stimulation will commence in order to achieve the maximum production levels and enhance oil recovery.
Current oil production is being used to complete the commissioning of the oil processing facilities and is filling the oil storage tanks at the facilities site and will commence filling the 60 km pipeline to the Kiev-Eganskoye transfer point shortly.
Development Drilling
Drilling of the seventh of the planned nine production wells at the Lineynoye oil field has now been completed ahead of schedule. Preliminary log and survey data indicate that the well encountered the thickest net pay to date in the development programme.
| Well No. | Top of reservoir vertical depth subsea metres | Gross hydrocarbon interval metres | Net oil pay metres | Comments |
|
116 |
2,400 |
22.7 |
17.9 | Interval is completely saturated with oil. |
The well was drilled in 14 days which is the fewest days yet in the current development drilling programme.
Production casing has been run in the well and cemented. The drilling rig has been moved along its rails and drilling of the eighth well has commenced.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented:
"We are delighted to announce that the Lineynoye Phase 1 project has achieved first year-round oil production. This has been a monumental accomplishment achieved in less than one year of the funding for the project. We owe special thanks to our Tomsk staff for their hard work, professionalism and planning to make this project a reality. The commencement of production is a transformational milestone for PetroNeft and provides a tremendous platform from which the Company can position itself for future growth."
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 |
| Henry Fitzgerald-O'Connor/Filip Bavenholm, Canaccord Genuity 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 from a total of 11 wells including two previously drilled wells and nine new production wells being drilled in 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.