Operational Update
Petroneft Resources PLC
23 November 2007
PetroNeft Resources plc
Operational Update
PetroNeft Resources plc ('PetroNeft' or 'the Company'), is pleased to provide
this update on the progress of its operational activities on Licence 61, Tomsk
Oblast, Russian Federation.
Highlights
Drilling Programme and Reserves Report
• Successful 2006/07 three well drilling programme:
• Significant new discovery at West Lineynoye.
• Confirmation of thick oil-filled pay columns of high quality oil in
both of the existing fields;
- Lineynoye confirmed with log, core and flow test data
- Tungolskoye confirmed with log and core data - flow testing ongoing
• Lowering the previously-believed Lineynoye oil/water contact by about
10 metres.
• Tungolskoye No. 4 successfully side-tracked. Flow test temporarily
suspended, due to mechanical faults, and will recommence in December when
additional supplies can be transported to the rig site by winter road.
• Full reserves review to be carried out by year end by Ryder Scott. Russian
reserves for the Licence area are being simultaneously updated, with
material increases anticipated from both processes.
Development Planning and Pilot Production
• Pilot production plan approved by Ministry of Industry and Energy of RF.
• Export Pipeline Survey for engineering design and approvals is 80%
complete.
• Approval of tie-in to Transneft at Raskino pumping station has been
received.
• Electrical Submersible Pumps have now been installed in the Lineynoye
No. 6 and No. 7 wells for pilot/long term test production this winter.
• Ongoing discussions with international banks in relation to debt finance
for the development of Licence 61.
2007/2008 Three Well Drilling Programme
• New 'turnkey' contract to drill two exploration wells, targeting over 50
million barrels of possible reserves, and a delineation well on the newly
discovered West Lineynoye Field, commencing February/March 2008, has been
agreed under favourable terms.
Operational Overview
Following the successful Lineynoye No. 6 delineation well and the West Lineynoye
discovery well (Lineynoye No. 7) the pilot production plan for Lineynoye has
been approved by the Ministry of Industry and Energy of RF and the Company has
been included in the Reporting Structure of Oil and Gas Producing Companies.
This approval was necessary in order to commence pilot/long term production
testing of the Lineynoye No. 6 and No. 7 wells this winter. Electrical
submersible pumps have already been run in both wells utilising the drilling
rigs currently at the well locations and test production will commence as soon
as winter roads are in place to facilitate trucking the oil. It is planned to
be in pilot production throughout the winter months as long as the winter roads
can be kept open.
The Tungolskoye No. 4 appraisal well (T-4), which has 15 metres of net oil pay
based on the core data and independent log interpretations, has now been
side-tracked. The side-tracked well bore successfully penetrated the reservoir
about 100 metres to the east and 5 metres structurally higher than the vertical
hole. However, we are still experiencing mechanical problems with the testing
and need to mobilise additional equipment and supplies to the well site. The
testing has been temporally suspended until winter roads are in place to
complete the mobilisation, which should occur during December.
After the T-4 well test data is available, independent consultants Ryder Scott
will complete their reassessment of the reserves on Licence 61. Simultaneously,
we are in the process of updating the Russian Reserves on Licence 61. Final
reserves figures can not be determined until after Ryder Scott and the Russian
expertise reviews are completed, but it is anticipated that both will result in
significant increases to the Licence 61 reserves. This is expected to be
completed by year end.
The pipeline survey to export oil from Licence 61 to Transneft at the Raskino
pumping station is now approximately 80% complete. This survey includes all of
the engineering design and approvals for the pipeline and custody transfer point
at Raskino. The Company received approval to tie-in at the Raskino pumping
station in September 2007.
Starting in February 2007 the Company commenced discussions with international
banks in relation to debt finance for the development of Licence 61. These
discussions are continuing based on the results from this years drilling and
seismic programmes.
2007/2008 Exploration and Appraisal Programme
A new 'turnkey' contract has been entered into with Tomskburneftegaz LLC for the
drilling of three additional wells during the 2007/08 drilling season utilizing
the three existing drilling rigs that are currently on Licence 61. The total
value of the contract is about US$ 12 million. Vakha Alvievich Sobraliev, a
Director and significant shareholder of PetroNeft, is a principal of
Tomskburneftegaz LLC and accordingly the contract constitutes a related party
transaction under Rule 13 of the AIM and IEX Rules. The Directors of PetroNeft
(with the exception of Vakha Alvievich Sobraliev) consider, having consulted
with Davy, the Company's nominated adviser, that the terms of the contract are
fair and reasonable insofar as the Company's shareholders are concerned.
The results of this year's drilling programme, along with the seismic programmes
undertaken over the last two years, have already been taken into account in
planning next year's three well drilling programme. This three well programme,
which is expected to commence in February/March, will seek to further delineate
the newly discovered West Lineynoye Oil Field and to drill two low risk
exploration prospects in the Tungolskoye-Lineynoye oil productive fairway.
These two prospects, Korchegskaya and West Korchegskaya, are estimated to
contain about 50 million barrels of possible reserves.
The necessary materials for these wells have already been moved to the Negotka
staging area by river barge and will be moved to the well locations as soon as
winter roads are in place commencing in December.
The Company is also focused on expanding its operational footprint beyond
Licence 61 and is currently evaluating a number of opportunities, which match
its skills and expertise.
Dennis Francis, Chief Executive Officer of PetroNeft commented:
'We are making good progress across the full spectrum of our projects and are
pleased with the results. Over the last year we have added considerable value to
the company, both in terms of material reserves increases and preparing for
production and positive cash flows.
Whilst delays, particularly on the Tungolskoye No. 4 side-track, have impacted
our schedule, the Company remains focused on its policy to expand the reserve
base in Licence 61 and the development of existing reserves to early full
production.
The three well drilling programme, pilot/long term production tests and
completion of the field development plan, will make for a very active year in
2008.'
For further information, contact:
Dennis Francis, CEO, PetroNeft Resources plc (Houston)
+1 713 988 2500
Paul Dowling, CFO, PetroNeft Resources plc (Dublin)
+353 144 33720
Desmond Burke, Director Investor Relations, PetroNeft Resources plc (Ireland)
+353 52 53226
John Frain/Brian Garrahy, Davy
+353 1 679 6363
Damien Mauvais, Natixis Bleichroeder
+44 207 220 5184
Nick Elwes/Paddy Blewer, College Hill (UK)
+44 207 457 2020
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 34 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.
This information is provided by RNS
The company news service from the London Stock Exchange