Status Report on PetroNeft Resources Activities
April 14, 2006
Status Report on PetroNeft Resources Activities
Summary
The company remains focused on License 61 with its key objectives being;
1) the timely monetisation of the existing core 2P reserves of 28 million
barrels of oil and
2) the determination of the full upside reserve potential of the license
area.
In order to accomplish these objectives the major long term tasks driving
PetroNeft's activities can be summarized as follows;
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Preparation for next year's drilling program on the Lineynoye and Tungolskoye oil fields.
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Study of infrastructure options for production operations.
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Developing Environmental and other surveys required for drilling and production authorisation.
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Continuing the overall accumulation of consistent and high quality seismic data to facilitate the longer term exploration and production of new oilfields on Licence 61.
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Ensuring that documentation and other preparations for a market quote on AIM and IEX are in place for the planned September IPO
We are glad to report that the company's activities are progressing on time and within the approved expenditures.
1. Preparation for 2006/07 Winter Drilling Program - OOO
"Nizhnevartovskservis"
Mobilization efforts during the period have focused entirely upon moving the
rig from the West-Tymskaya location to the Lineynaya No. 6 well location
(Figure 2). This was the critical move that needed to be made this winter to
achieve our planned schedule. The second rig for the Tungolskoye No. 4
location will be moved to a staging area by river barge this summer and then
to location at the end of the year. As for the Lineynaya No. 6 well, the winter
road was constructed and the drilling rig, camp, fuel tanks and surface casing
are being moved to the site. As of April 14, we estimate that another week
will be required to have all of the equipment moved to the drilling location.
Stumping (tree cutting) of the area for the rig site and a helicopter pad is in
progress. Temperatures are still - 30° C in the field area and the winter roads
are holding up.
In conjunction with the drilling program for the Lineynaya No. 6 and
Tungolskaya No. 4 wells, various well construction contracts have been
agreed that allow for the preparation of the 1) pre-design documents
development, 2) geological projects and 3) technical design for the
construction of the wells, including obtaining the necessary approvals of the
design documents from the state and regional authorities. One additional
contract has been agreed with the Alexandrovsky Forestry Department to
prepare the land allotment documents for the wells. These contracts are all
being completed according to schedule and within the original budget.
2. Infrastructure Activities
Studies are underway which will allow us to determine the various
infrastructure options for developing the existing and potential fields in the
License area.
3. Environmental Base Line Study
A contract was signed on April 11 with the Oblast State Agency "Oblast
Committee for Environmental Protection and Management" for a baseline
environmental survey of the Tungolskoye License area. One set of data
needs to be acquired this winter while snow is still in the area and another set
needs to be acquired this coming summer. The workscope also requires the
development of an environmental monitoring system which will complete the
environmental activities needed to fulfill the current License requirements.
4. Seismic Reprocessing & Interpretation - LLC "Tomskaya
Geophysical
Following approval of the Board, we have negotiated a new contract with
"Tomskaya Geophysical
activities. Firstly, they will incorporate the new high resolution seismic data
acquired this winter by "Stavroploneftegeofizika" into the structural
interpretation in the northern part of the License area.
Secondly, "Tomskaya Geophysical Co." will also obtain from government
archives, reprocess and interpret approximately 1,262 line kilometers of the
remaining vintage seismic data in the southern part of the License. Initial
results of this evaluation will be available in June for incorporation into an
updated Ryder Scott competent person's report on the reserves in the
License. This reinterpretation will also be the basis for the acquisition of
additional seismic data during the 2006/2007 winter season (see below).
5. Acquisition and Processing of New Seismic Data - 2005/06
OAO "Stavropolneftegeofizika"
Despite a slow start to acquiring seismic data this winter due to the unusually
cold weather, the "Stavropolneftegeofizika" field crew has made excellent
progress during the months of February, March and April. They successfully
collected all the data required to meet our scheduled work for the season. In
fact progress has been good enough to allow for the acquisition of an
additional
the acquisition status stood as follows:
Line preparation Drilling of Shot Holes Seismic Acquisition
Line kms Line kms Line kms
515 kms 515 kms 515 kms
A generalized map showing the location of the seismic data is shown in
Figure 1.
During the period PetroNeft's Dr. Karazpuzov and a representative of
"Tomskaya Geophysical Co." visited the processing facilities of
"Stavropolneftegeofizika" in
and processing schedule for the new data acquired this winter. Based on the
initial results it appears that the high resolution 2D seismic data acquired this
season is of much higher quality than any of the seismic data acquired in the
past. We have good reason to believe that new data will provide better
structural resolution and prediction of the stratigraphy in the License area. All
of the processed data is to be delivered on schedule by June 15, 2006.
6. Acquisition and Processing of New Seismic Data - 2006/07
OAO "Stavropolneftegeofizika"
Following approval of the Board, PetroNeft has agreed a new contract with
OAO "Stavropolneftegeofizika" for the acquisition of an additional 500 kms of
high resolution 2D seismic data during the winter season of 2006/2007. Not
only does this allow us to meet our License requirement to acquire 1,000 kms
of seismic data during the first three years of the license term, but it allows us
to lock-up a seismic crew with some of the best technical qualifications in the
region. Completion of this program and the reinterpretation of the vintage
seismic data (see item 4 above), will put the company in a position where a
complete, uniform data base is available over the entire License area. This
will enable the company to plan exploration, development and production on
the License in a rational manner over the coming years.
7. PetroNeft Resources Consulting
While the primary business and focus of the company is the development of
License 61 and growing that asset, the company has a cadre of associate
consultants with expertise for doing business in
both Russian and foreign nationals and we normally have one or two jobs
going at one time. The company does not make a lot of money off these
activities but the jobs create goodwill, pay our associate consultants a
competitive rate and keep us engaged in the day to day business and deal
flow in
- Topping Plant Financing EBRD - We have an ongoing contract with
"Tomskneftpererabotka" to assist in arranging EBRD financing for a
small topping plant located at the village of Semiluzhki 18 kilometers
from Tomsk. Services will result in a potential ownership interest in the
Topping Plant by the Company which will help to maximize our return
on domestic production. Documentation for this project has been
prepared and submitted to EBRD. The project is scheduled to be
presented to EBRD's Operations Committee in May.
- Foster Wheeler Contract (BP-TNK) - We have an active contract to
provide Russian technical experts in the areas of pipelines and
processing plants.
8. Website
The new PetroNeft Resources website was activated on March 23 and can be
accessed at www.petroneft.com. The website design and development was
prepared in house with the help of a local Tomsk Company, Pratere Investing
Inc. (ContekSoft)
9. IPO Activities
Discussions are already underway with the various parties who will be
involved in the preparation and due diligence of materials for the planned
September listing on AIM and IEX. The schedule for the development of this
material has been agreed and tasks assigned.
In the summary we are pleased to report that the company's activities are
progressing on time and within the budgeted expenditure. Importantly we
have already secured two drilling rigs and a seismic crew for our planned
activities during the 2006/07 winter period. Should you have any questions
regarding the above report please feel free to contact us via our website.
Sincerely,
Figure 1 - Map showing Location of New Seismic Data
Figure 2 - Map showing Rig Mobilization and Adjacent License Area
April 14, 2006 STATUS REPORT ON PETRONEFT RESOURCES ACTIVITIES (216 kb)
