Drilling Report

21 Oct 2005 07:00

Urals Energy Public Company Limited21 October 2005 21 October 2005 Urals Energy Public Company Limited Sakhalin Island Drilling and Exploration Update Urals Energy Public Company Limited ("Urals Energy") today announces anoperational update and the successful completion of its second development wellat its Petrosakh subsidiary. Urals Energy is a leading independent explorationand production company with operations in Russia. Urals Energy listed itsshares on the London Alternative Investment Market in August 2005, and placedshares resulting in a total fund raising $131.1 million. Development Drilling The Group's Russian subsidiary Petrosakh is currently producing 2,800 bopd from16 wells in the Okruzhnoye Field at Sakhalin Island. A 14 well developmentdrilling programme targeted at increasing production to c. 5,800 bopd isunderway. The results of drilling the first two wells of this program, asfurther described below, provide confidence this target will be achieved. The first well, Well 43, was recently drilled and is flowing at a sustained rateof 360 bopd. The second well, Well 44, has now been completed and is producingat a stabilised rate of approximately 660 bopd on a 13mm choke with 4% watercut. Well 44 was drilled to a total depth of 1,856 metres where it encounteredthe Pileng formation at 1,546 metres. The Pileng formation was perforated atvarious intervals from 1,741 to 1,583 metres. DeGolyer and MacNaughton, Urals Energy's independent engineering consultants,has projected a rate of 350 bopd per each new development well for the field.Well 43's production rate is in line with this estimate while the results ofWell 44 significantly exceeds DeGolyer and MacNaughton's projection. Drilling of a further 12 development wells on this field is scheduled tocommence in the second quarter of 2006. Exploration Programme Petrosakh is also currently mobilising drilling equipment for the exploration ofthe Pogranichny Block offshore Sakhalin Island with the intention of using twodrilling rigs, the Deutag T-2000 rig and a local Russian rig. The Russian rig, a BU-1600, will drill two wells to test the East Okruzhnoyeprospect located approximately 1.5 kilometers offshore. The BU-1600 rig is nowon location and 80% rigged-up. The drilling of Urals Energy's first offshoreexploration well to test the Pogranichny Block, East Okruzhnoye No. 1, is nowscheduled to begin by early November, a month earlier than originally planned. DeGolyer and MacNaughton estimates this prospect to contain unrisked potentialresources of approximately 50 million barrels. The Group is also targeting the Vitnitskaya and the Severo Rymnikskaya prospectsoffshore Sakhalin Island estimated by DeGolyer and MacNaughton to have combinedunrisked potential resources of approximately 247 million barrels. William R. Thomas, Chief Executive Officer, commented: "These development drilling results are significantly ahead of expectations andshould boost production by about 1,000 bopd allowing us to benefit fromattractive commodity prices. With a further 12 development wells scheduled fornext year the potential of Petrosakh is very encouraging. Our exploration programme is on track with our first exploration well due tospud within the next two weeks, targeting a high potential prospect offshoreSakhalin Island. Our strategy of exploiting our asset base to build the Group organically isalready generating returns. We continue to assess a number of potentialacquisition opportunities to capitalise on the rationalisation in Russia and theCIS." 21 October 2005 Pelham PRJames Henderson 020 7743 6673Gavin Davis 020 7743 6677 About the company: Urals Energy is an independent exploration and production (E&P) company with itsprincipal assets and operations in Sakhalin Island, Timan Pechora (includingareas in the Nenets Autonomous Okrug and Komi Republic) and the Republic ofUdmurtia, Russia. The company listed on AIM in August 2005. The Company is focused on the integration of its five recently acquiredsubsidiaries and the exploitation of their assets. In addition, it is activelyseeking to continue to grow and diversify its reserve and production portfoliothrough exploration activities and the acquisition of additional E&P companiesor assets by taking advantage of the ongoing rationalisation of E&P assets inRussia. The Company's five E&P subsidiaries have Proved and Probable reserves of 89.7million barrels of oil equivalent (MMBOE) and produced approximately 5,600barrels of oil per day (BOPD) during the first six months of 2005. The Company's two largest subsidiaries by reserves and production, Petrosakh andArcticneft, own and operate refining assets with a total refining capacity of5,300 BOPD, which provide the Company with the ability to maximise the value ofthe oil produced by choosing between the sale of oil or of refined productsdepending on market conditions, tax considerations and other factors. This information is provided by RNS The company news service from the London Stock Exchange