Operational Update

PetroNeft Resources plc

Operational Update

Highlights

• Positive inflow testing of Lineynoye No. 7 - 125 bopd unstimulated
• High quality oil - 44° API
• Planned winter pilot/long term production test of both Lineynoye No. 6 and No. 7
• Tungolskoye No. 4 is being sidetracked to fully assess reservoir
• Full reserves review to be carried out in November 2007 by Ryder Scott

Lineynoye No. 7 Well

Initial analysis of the Lineynoye No. 7 exploration well on the West Lineynoye Prospect, released on 14 August, confirmed the presence of 2 metres of net hydrocarbons in the Upper Jurassic J1 sandstone interval.  It also confirmed a Gross Oil Column of 22 meters. Flow testing ("Raising Head" methodology) of the well has now been successfully completed over a 4 metre gross perforated interval (-2,502 to -2,506 metres measured depth). During testing, the well flowed oil at rate of 125 barrels per day. The oil is very high quality with a 44° API gravity.

This well will require an electrical submersible pump for commercial production.  Initial conservative studies based on the pay zone properties and test results indicate that the well should flow at least 250 bopd with the proper electrical submersible pump.  This level of unstimulated flow is excellent for the region, where tight reservoirs normally require reservoir Stimulation for production.  Stimulation of the reservoir through hydraulic fracturing will further increase this flow rate from the well.

Studies are now underway to place the well (along with Lineynoye No. 6) on pilot/long term production test during the winter season of 2007/08.

Tungolskoye No. 4 Sidetrack

The Tungolskoye No. 4 appraisal well has 15 metres of net oil pay based on the core data and independent log interpretations. This represents the best reservoir interval encountered of the 17 wells drilled in the block to date. However, we are currently sidetracking the existing well in order to overcome mechanical difficulties and fully test the accumulation at this location.  It is anticipated the well will be sidetracked and tested before the end of October.

When all testing is completed a reassessment of the reserves in the established oil fields on Licence 61 will be carried out by outside consultants Ryder Scott. The results will be incorporated into the Plan of Development.

Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:

"We are pleased to announce positive results for the Lineynoye No. 7 flow testing.  We are especially excited by the demonstrated flow rates and projected rates on Artificial Lift without Stimulation.  This provides positive results for ongoing development planning.

We are making progress across the full spectrum of our projects. The Tungolskoye No. 4 sidetrack will give us necessary information for a full reassessment of our reserves levels which will be carried out to both SPE and Russian standards /criteria.  Along with our winter 2007/08 three well drilling programme, we will conduct two pilot/long term production  tests and also plan to complete the  field development plan in the near future."

 

For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc (Houston)
+1 713 988 2500

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.
 

Glossary of Key Technical Terms

Artificial Lift - Any system that adds energy to the fluid column in a wellbore with the objective of initiating and improving production from the well. Artificial-lift systems use a range of operating principles, including rod pumping, gas lift and electrical submersible pumps.

Gross Oil Column - the total thickness of reservoir and non-reservoir rock above a common oil water contact.

Rising Head Test - Production flow test run in a well with low formation pressure.  In this case the volume of fluid produced into the production string is measured at various dynamic levels.  This information provides the basis for estimating production capacities and future reservoir performance.  In this case the well tested 125 bopd at an average dynamic level of 1,527 metres.

Stimulation - A treatment performed to restore or enhance the productivity of a well. Stimulation treatments fall into two main groups, hydraulic fracturing treatments and matrix treatments. Fracturing treatments are performed above the fracture pressure of the reservoir formation and create a highly conductive flow path between the reservoir and the wellbore. Matrix treatments are performed below the reservoir fracture pressure and generally are designed to restore the natural permeability of the reservoir following damage to the near-wellbore area. 
   

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.