VGAS.L Regulatory News (VGAS)

26 Mar 2008 07:01

Volga Gas PLC26 March 2008 26 March, 2008 VOLGA GAS PLC Drilling Update - Vostochny-Makarovskoye #1 ("VM#1") Volga Gas Plc (the "Company") is pleased to provide an update on well VM#1 onthe Vostochny-Makarovskoye license area. Highlights •More than 200m of gross pay in the Bobrikovsky and Evlano-Livenskiy horizons •Good production rates in both horizons VM#1 was spudded on 30 September 2007, targeting the Bobrikovsky sandstone andEvlano-Livensky carbonate formations. The Bobrikovsky horizon was cored and tested between 1587m and 1623m (TVD MSL).The gross pay zone is confirmed at approximately 40m. The open hole test yielded40-70 mcm/day (1413-2472mcf/day) of gas. The Evlano-Livenskiy horizon has proved to be considerably more promising thanwe had originally anticipated at the time of the IPO in April 2007. The originaldiscovery well drilled in 1989-90, by LUKoil-Nizhnevolzhskneft encountered a 47mgross pay zone with gas down to 2,322m (TVD MSL) in the Evlano-Livenskiyhorizon. The gas-water contact was not established. The gross pay zone has nowbeen confirmed to exceed 160m, in the Evlano-Livenskiy horizon. Due to theabsence of impermeable shale zones in the reservoir, gross and net pay arealmost identical. The inferred open hole test results are summarized below: Interval Tested Gas CondensateDepth, meters mcm/day mcf/day t/day bbl/day(TVD MSL) 2275.0 - 2295.0 34 1200 - -2296.0 - 2313.0 54 1906 - -2315.0 - 2332.0 24 847 9 742334.0 - 2350.0 19 671 13 1072350.0 - 2372.5 40 1412 29 2382375.0 - 2402.0 76 2670 72 5902408.7 - 2442.0 20 706 92* 754* * The condensate production test results have been estimated from the previousinterval's test results and may change significantly following cased holetesting. The well has been cased and is about to be perforated. Cased hole testing isexpected to be conducted over a number of months. Volga Gas also identified the Eletsky layer at 2091-2107m (TVD MSL) which is gasbearing. During open hole testing it flowed at 2mcm/day (71mcf/day). However,further testing will be required to identify the potential of this layer afteracid stimulation. The current BK Eurasia rig is contracted to drill a further four more productionwells once it has finished with completion on VM#1. Mikhail Ivanov, Chief Executive of Volga Gas commented: "We are delighted with the results of drilling on the Evlano-Livenskiy horizon.The tested pay zone has more than tripled and production rates indicate aproductive field with more condensate than initially anticipated. "The results are clearly more positive than we expected and will have a materialimpact on our reserve estimates. We will recalculate the reserves aftercompletion of the second well on this field later this year. "With construction of the gas processing plant due to commence shortly we areconfident that Vostochny-Makarovskoye will commence initial production on planby the end 2008." The Company is hosting a conference call for analysts at 11:30am on Wednesday26th March. The dial-in number is 0845 146 2004 quoting the reference: VolgaGas. - Ends - Volga Gas is an independent gas exploration and production company, whichcurrently holds four subsoil licenses in the Volga Region of European Russia For additional information please contact: Financial DynamicsBilly Clegg +44 (0)20 7269 7157Alex Beagley +44 (0)20 7269 7207 KBC Peel Hunt (Nominated Adviser) +44 (0)20 7418 8900Jonathan MarrenAlina Savych The information contained in this announcement has been reviewed and verified byMr. Mikhail Ivanov, Director and Chief Executive Officer of Volga Gas plc, forthe purposes of the Guidance Note for Mining, Oil and Gas companies issued bythe London Stock Exchange in March 2006. Mr. Mikhail Ivanov holds a M.S. Degreein Geophysics from Novosibirsk State University. He has also MBA degree fromKellogg School of Management (Northwestern University). He is a member of theSociety of Petroleum Engineers. This information is provided by RNS The company news service from the London Stock Exchange