Operational Update

1 Dec 2005 07:02

Urals Energy Public Company Limited01 December 2005 1 December 2005 Urals Energy Public Company Limited Operational Update Urals Energy is a leading independent exploration and production company withoperations in Russia. The Company listed its shares on the London AlternativeInvestment Market in August 2005, raising $131.1 million. On 15 November 2005Urals Energy announced the completion of the US$70 million acquisition of OOODinyu in the Komi region of Russia. Urals Energy Public Company Limited ("Urals Energy" or the "Company") todayannounces an operational update: • Encouraging drilling to date of the East Okruzhnoye No.1 well, with the well now reaching a measured depth of 1,725 metres and on track to reach the target formation measured depth of 1,854 metres within two weeks • Record production of 8,900 bopd, an increase of 60% within the last two months, driven both by acquisition and organically through development drilling at Petrosakh • Petrosakh development drilling has added c.1,000 bopd • Following successful execution of Company strategy to date, initial IPO production estimates of reaching 10,500 bopd by the end of 2007 have increased to estimated production of 14,000 bopd by end of 2007 • Acquisition of remaining 35% share of South Michau field not owned by Urals at a cost of $200,000. giving Urals 100% ownership of the field • Application for a five year extension for the Pogranichny Exploration License has been submitted • Completion of two successful workover wells in the Okruzhnoye Field at Sakhalin Island William R. Thomas, Chief Executive Officer, commented: "We are delighted with the significant progress we have made on production todate. This growth has been driven both organically and by acquisition. Withaggressive development drilling planned for 2006 we are confident of meeting ourrevised production targets. Our strategy of building a material exploration and production business throughexploitation and acquisition is on track." 1 December 2005 Pelham PRJames Henderson 020 7743 6673Gavin Davis 020 7743 6677 Exploration Programme The East Okruzhnoye No.1 well spudded on November 1 and is testing the Eastfault block of the East Okruzhnoye prospect in the Pogranichny license areaoffshore Sakhalin Island. The well is drilling to plan and has now reached ameasured depth of 1,725 metres. This well is ahead of schedule and is currentlyexpected to reach the target formation, the Pileng horizon, measured depth of1,854 metres, within the next two weeks. Depending on results, the Pilenghorizon will be cored in four intervals of five meters each, and then open holelogs will be run and production casing set. In the event a productive Pilenghorizon is encountered, the completion and initial testing program isanticipated to last several weeks from setting casing. DeGolyer and MacNaughton estimates this east fault block of the East Okruzhnoyeprospect to contain unrisked potential resources of approximately 25 millionbarrels. On 28 November 2005, Urals Energy submitted an application to the SakhalinDepartment of the Federal Services for a five year extension of the PogranichnyExploration License currently held by ZAO Petrosakh. The Company intends toreprocess 355 kilometres of 3D seismic and drill a further three explorationwells within the license period. A successful application would give UralsEnergy the flexibility to convert its licence to a production licence in theevent of successful exploration results over the next five years. Production Following successful development drilling at Petrosakh, which has boostedproduction by a further 1,000 bopd, and the recent completion of the OOO Dinyuacquisition, total production has risen to a record 8,900 bopd. This compareswith 5,582 bopd at the time of the Company's interim results on 23 September2005, which represents an increase of 60% within the last two months. At the time of the Company's listing in August 2005, the Company announced theintention to grow production to c.10,500 bopd by the end of 2007. Successfulexecution of the Group's strategy has resulted in current production increasingto a level close to the Group's initial IPO target. The Company has reviewed itsforward production estimates and is currently targeting total Company productionof 14,000 bopd by the end of 2007. This growth will be principally driven byUrals Energy's planned development drilling programme at Petrosakh, Dinyu,Arcticneft and Chepetskoye. Development Drilling Urals Energy announced on 21 October 2005 a 14 well development drillingprogramme at its Russian subsidiary Petrosakh in the Okruzhnoye Field atSakhalin Island targeted at increasing production to c. 5,800 bopd. Twosuccessful development wells, which tested at a stabilised rate of approximately360 bopd and 660 bopd respectively, and a further two workover wells have beensuccessfully completed. Drilling of a further 12 development wells on this field is scheduled tocommence in the second quarter of 2006. OOO Dinyu Following completion of the acquisition of OOO Dinyu which gave Urals Energy twolicences, the Dinyu-Savinbor Field (100% ownership) and the South Michau Field(65% ownership), Urals Energy has subsequently acquired the remaining 35% of theSouth Michau Field not owned by Dinyu. The agreed price for this remainingownership interest in South Michau is $200,000; giving Urals Energy 100%ownership of the Field on attractive terms. Total control of this licenseallows Urals shareholders to benefit from the full upside that may result fromthe Company's planned aggressive appraisal and development programme on theSouth Michau Field. This information is provided by RNS The company news service from the London Stock Exchange