First Production and Revenue

5 Dec 2007 07:00

Volga Gas PLC05 December 2007 05 December 2007 VOLGA GAS PLC First Production and Revenue Highlights o First oil production delivered ahead of schedule o Agreement to sell oil produced secured at RUR7,550/tonne (approx $42/ bbl) at the wellhead Volga Gas Plc (the "Company"), the independent gas exploration and productioncompany, which currently holds four subsoil licences in the Volga region ofEuropean Russia, today announces that oil production has commenced fromUzenskaya #1 and first revenues have been received. The Company has structuredan agreement to sell all its oil production at its surface facilities located onthe Uzenskaya field at RUR7,550/tonne (approx $42/bbl). As the production issold locally the Company does not need to pay export taxes, which are currentlyapproximately $35/bbl. The production from this well has been kept to 100 barrels of oil per day tolimit the production of free gas. The well was drilled at the top of thestructure and hit a small gas cap as well as the underlying oil. The surfacefacilities will be upgraded in 2008 to allow the Company to utilize the gaswhich should lead to increased oil production rates. The Company has started acquiring 140km2 of 3-D seismic over the Uzenskaya fieldand 5 other identified supra-salt structures on the Karpenskiy licence area. Itis expected that this 3-D will assist the Company in identifying locations ofadditional wells on the Uzenskaya field which, if successful, would be expectedto have higher production rates as they would be located away from the gas cap. Additional supra-salt fields which are successfully brought in to production maybe tied back in to the surface facilities at Uzenskaya. Mikhail Ivanov, Chief Executive Officer of Volga Gas plc said: "I am pleased we have delivered our first production, albeit on a small scale, ayear ahead of the schedule outlined at the time of our IPO. We will continue todevelop these small, but profitable, supra-salt fields. Our principal effortsremain the exploration/appraisal of the larger supra-salt prospects in the northof the Karpenskiy licence area and bringing Vostochny-Makarovskoye in toproduction." For additional information please contact: +---------------------------------+-----------+---------------------------+|Financial Dynamics | | |+---------------------------------+-----------+---------------------------+|Jonathon Brill | |+44 (0)20 7269 7170 ||Billy Clegg | |+44 (0)20 7269 7157 ||Ekaterina Alferova | |+44 (0)20 7269 7257 |+---------------------------------+-----------+---------------------------+|KBC Peel Hunt Ltd (Nominated | |+44 (0)20 7418 8900 ||Adviser and Joint Broker) | | ||Jonathan Marren | | ||Alina 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