Operational update
December 9, 2009
PetroNeft Resources plc owner and operator of€Licence 61, Tomsk Oblast, Russian Federation, is€pleased to€provide an€update on€its operations.
Highlights:
- Nine well development drilling contract awarded
- Pipe and equipment moved to€staging area south of€Licence 61 and welding ahead of€schedule
- Design of€field facilities well advanced
- All activities are currently on€schedule and all costs to€date are within or€below original estimates
Drilling Contract
The Board of€PetroNeft has agreed to€award a€contract for the drilling of€nine development wells at€the Lineynoye oil field in€2010 to€Tomskburgneftegaz ("TBNG"). The contract, which was awarded following a€competitive tender process, is€a€fixed price contract and within budget. TBNG's drilling rig is€already stored at€a€river port near Licence 61 and will be€mobilised and erected in€the first quarter of€2010. Drilling will commence on€schedule in€April 2010.
In€accordance with AIM Rule 13 and IEX Rule 13, the drilling contract is€deemed to€be€a€related party transaction as€Vakha Sobraliev, a€Non-Executive director of€the Company, is€principal owner of€TBNG.
With the exception of€Vakha Sobraliev who is€involved in€the transaction as€a€related party, the directors consider, having consulted with Davy, the Company's Nominated Adviser and IEX adviser, that the terms of€the drilling contract are fair and reasonable insofar as€shareholders are concerned.
Pipeline
The transport of€the pipe to€a€staging point south of€Licence 61 was completed in€late October 2009. The pipeline construction contractor also completed the move of€their equipment to€this location in€early November. The contractor has set up€a€welding facility and completed the welding of€over two thousand 30-metre lengths of€pipe thereby reducing significantly the amount of€welding that needs to€be€undertaken during the pipe laying process in€the field. This work was completed 3 weeks ahead of€schedule.
The next stage of€the pipeline construction is€to€clear the route and lay the pipeline which will commence as€soon as€the ground is€sufficiently frozen to€support heavy equipment, which is€expected to€be€by€early January 2010.
Field facilities
The detailed design work for the facilities required at€the Lineynoye oil field is€well advanced and much of€the required equipment has been tendered for. To€date, all indications are that costs will be€within budget. It€is€expected that all contracts for the various equipment and construction elements of€this project will be€awarded by€the end of€January 2010.
Senior management appointments
In€November 2009, Valery Solovyev, was appointed to€the Group as€Chief Engineer. Valery has over 30 years experience in€the development of€oil and gas fields having held previous positions in€companies such as€Imperial Energy and Tomskneft. Further senior appointments in€the areas of€operations and business development are anticipated over the coming months.
Dennis Francis, Chief Executive Officer of€PetroNeft Resources plc commented:
"We€continue to€make encouraging progress toward year-round production in€2010. All activities are currently on€schedule and all costs to€date are within or€below original estimates. We€are particularly pleased to€welcome Valery Solovyev to€PetroNeft and look forward to€building our team further during 2010."
For further information, contact:
| Dennis Francis, CEO, PetroNeft Resources plc | +353 1€443€3720 |
| Paul Dowling, CFO, PetroNeft Resources plc | +353 1€443€3720 |
| John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker) | +353 1€679€6363 |
| Jeffrey Auld/Elijah Colby, Canaccord Adams Limited (Joint Broker) | +44€207€050€6500 |
| Nick Elwes/Simon Whitehead, College Hill | +44€207€457€2020 |
| Joe Murray/Ed Micheau, Murray Consultants | +353 1€498€0300 |
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.
Notes to€Editors
PetroNeft Resources plc was established in€2005 to€develop oil and gas assets in€Russia and the Former Soviet Union and was admitted to€the London AIM and Dublin IEX Markets on€27th September 2006.
The main asset of€the Company is€a€100% interest in€a€4,991 sq€km€oil and gas licence in€the Tomsk Oblast in€Russia, held through its wholly owned Russian subsidiary, Stimul-T. The Licence is€located in€the prolific Western Siberian Oil and Gas Basin and contains four known oil fields, Lineynoye, Tungolskoye, West Lineynoye and Kondrashevskoye, and over 25 exploration Prospects and Leads.
The Board and Management of€PetroNeft is€made up€of€highly experienced professionals, including former Marathon Oil Company executives, in€the International and Russian Oil Exploration and Development business. The Russian Management team also has extensive local knowledge and experience in€the exploration and development of€oil and gas fields in€the Tomsk Oblast.
Since acquiring Licence 61 in€May 2005, the Company has carried out extensive reprocessing and reinterpretation, using modern technology, of€over 2,500 line kms of€vintage seismic acquired in€Soviet times. It€has also digitised and reinterpreted the logs of€14 wells drilled on€the Licence since 1972. PetroNeft also has acquired over 1,000 line kms of€new CDP-2D infill seismic and drilled six new exploration/delineation wells. This new seismic and six well drilling programme fully satisfied the exploration work obligation for the full 25 year licence term.
Reserve estimates on€Licence 61 prepared by€Ryder Scott as€of€31 December 2008 were:
| Proved reserves | (1P) | 10.2 million bbls |
| Proved and probable reserves | (2P) | 70.0 million bbls (P1+P2) |
| Proved, probable and possible reserves | (3P) | 529.4 million bbls (P1+P2+P3) |
PetroNeft has also recently announced a€crude oil transportation agreement with Nord Imperial, effective for 25 years, which significantly reduces the various permits and associated approvals required for pipeline construction as€well as€the costs. The new route, from Lineynoye to€Kiev-Eganskoye runs adjacent to€the Tungolskoye and Kondrashevskoye oil fields and will create useful synergies for future development phases.
On€21 September 2009 PetroNeft announced a€US$27.5 million fund raising from international institutional investors which fully funds the Phase 1 Development Plan for the Lineynoye and West Lineynoye Fields. PetroNeft expects to€have year-round production from the Licence in€the third quarter of€2010 with production of€4,000 bopd by€the end of€2010. Production from the Phase 1 project is€expected to€peak at€around 12,000 bopd in€2012.
