New Licence Acquisition

December 18, 2009

PetroNeft Resources plc owner and operator of Licence 61, Tomsk Oblast, Russian Federation, is pleased to announce that it has won the State Auction for a 100% interest in the Ledovy Licence No. 67 also in the Tomsk Region.


  • Ledovy Licence 67 is located in the main oil bearing region of the Tomsk Oblast west of the Ob River
  • The large 2,447 km2 Licence is surrounded by proven and producing oil and gas fields and is located close to existing road, power and pipeline infrastructure
  • Russian registered C3 (possible) recoverable resources are 55 million barrels in 3 prospects
  • There is believed to be significant upside within existing discoveries — two structures have previously tested oil but require further appraisal
  • Discoveries have potential to form the basis of a future development project
  • Modest initial 3 year work commitment involves reprocessing old well and seismic data, acquisition of 750 km of new seismic data and drilling of one well


The Ledovy Licence area is located west of the Ob River in the main oil bearing part of the Tomsk Oblast. The Licence has an area of 2,447 km2 and is surrounded by proven and producing oil and gas fields. Two producing oil fields, Grushevoye and Lomovoye, containing about 90 million barrels of C1+C2 reserves are located within the Licence area, but are excluded from the Licence. However, two existing drilled structures, Ledovoye and Sklonavaya, included in the Licence area have previously tested oil and may form the basis of a future development project.

The Vasyugan-Raskino oil pipeline and electric power lines run through the middle of the Licence area. There is a paved road and oil pipeline that runs to Strezhevoy through the northwestern tip of the Licence area. Both pipelines have the potential to accommodate production from any incremental discoveries in the Licence.

Location maps of the Ledovy Licence area are available on the PetroNeft website,

Brief History

Exploration on the Ledovy Licence began in the 1950s with wells being drilled on large prospects identified by vintage seismic data. Modern 2D seismic data was subsequently acquired from 1980 to 2001. Russian registered C3 (possible) resources are currently 55 million barrels.

A total of 8 wells have been drilled on the Licence. PetroNeft has reviewed the drilled and currently mapped undrilled structures and believes that there is significant upside within existing discoveries, potentially by-passed pay and new exploration prospects within the block. Two of the previously drilled structures, Ledovoye and Sklonavaya, have tested oil but have not to date been assigned reserves. PetroNeft believes that these discoveries have potential to form the basis of a future development project on the Licence, but also intends to pursue an active exploration programme.

Licence and Work Programme

The Licence is an exploration licence for 5 years but can be extended based on an agreed work programme. Discovered fields will convert into production licences once the discovery is registered. The minimum work commitments are to re-analyse the data from old wells and seismic surveys, acquire 750 km of new 2D seismic and drill one well within 3 years. The bid consideration was 42 million Roubles (US$1.39 million).

The planned 2010 work programme will focus on the overall re-evaluation of all the previous data on the Licence area with modern technology. Well and seismic data will be reprocessed and the results of this evaluation used to acquire 750 km of new seismic data, which will help to determine the exploration priorities for the Licence area. It is also possible that some of the old wells could become workover candidates. This analysis will also be part of the 2010 work programme.

Arawak Area of Mutual Interest

The Licence is within Western Siberia and thus falls within the 2008 Area of Mutual Interest agreement between PetroNeft and Arawak Energy Limited (Arawak). Under this agreement Arawak is entitled to participate in up to a 50 percent interest in the Licence and will confirm its intentions by the end of January 2010. PetroNeft will remain as operator of the Licence.

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

“We are very excited to have acquired the Ledovy Licence. This new acreage materially enhances our footprint in the Tomsk Oblast, is an important step forward in our stated growth strategy and exceeds our strict technical criteria for exploration and development potential. We are confident that we have added two new oil fields and many quality prospects to our portfolio at a very attractive cost. With year-round production from Licence 61 expected in the third quarter of next year, we look forward to further building our business and our asset base in the region in 2010 and beyond.”

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
Martin Jackson, Citigate Dewe Rogerson +44 207 638 9571
Joe Murray/Ed Micheau, Murray Consultants +353 1 498 0300

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 June 2009. 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.

Glossary of Technical Terms

Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC) Reserve Classification:

Proved Reserves (P1) — Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from know reservoirs and under current economic conditions, operating methods, and government regulations.

Probable Reserves (P2) — Probable reserves are those unproved reserves which analysis of geological and engineering data suggests are more likely than not to be recoverable. In this contest, when probabilistic methods are used, there should be at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of estimated proved plus probable reserves.

Possible Reserves (P3) — Possible reserves are those unproved reserves which analysis of geological and engineering data suggests are less likely to be recoverable than probable reserves. In this context, when probabilistic methods are used, there should be at least a 10 percent probability that the quantities actually recovered will equal or exceed the sum of estimated proved plus probable plus possible reserves.

Russian Classification of Reserves:

The Russian reserves system is based solely on the analysis of geological attributes. Explored reserves are represented by categories A, B, and C1; preliminary estimated reserves are represented by category C2; and potential resources are represented by category C3.

Category A reserves are calculated on the part of a deposit drilled in accordance with an approved development project for the oil or natural gas field. They represent reserves that have been analysed in sufficient detail to define comprehensively the type, shape and size of the deposit; the level of hydrocarbon saturation; the reservoir type; the nature of changes in the reservoir characteristics; the hydrocarbon saturation of the productive strata of the deposit; the content and characteristics of the hydrocarbons; and the major features of the deposit that determine the conditions of its development.

Category B represents the reserves of a deposit (or portion thereof), the oil or natural gas content of which has been determined on the basis of commercial flows of oil or natural gas obtained in wells at various hypsometric depths. Category B reserves are computed for a deposit (or a portion thereof) that has been drilled in accordance with either a trial development project or an approved development scheme.

Category C1 represents the reserves of a deposit (or of a portion thereof) whose oil or natural gas content has been determined on the basis of commercial flows of oil or natural gas obtained in wells and positive results of geological and geophysical exploration of nontested wells. Category C1 reserves are computed on the basis of results of geological exploration work and production drilling and must have been studied in sufficient detail to yield data from which to draw up either a trial development project or a development scheme.

Category C2 reserves are preliminary estimated reserves of a deposit calculated on the basis of geological and geophysical research of unexplored sections of deposits adjoining sections of a field containing reserves of higher categories and of untested deposits of explored fields. Category C2 reserves are used to determine the development potential of a field and to plan geological, exploration and production activities.

Category C3 resources are prospective reserves prepared for the drilling of (i) traps within the oil-and-gas bearing area, delineated by geological and geophysical exploration methods tested for such area and (ii) the formation of explored fields which have not yet been exposed by drilling. The form, size and stratification conditions of the assumed deposit are estimated from the results of geological and geophysical research. The thickness, reservoir characteristics of the formations, the composition and the characteristics of hydrocarbons are assumed to be analogous to those for explored fields. Category C3 resources are used in the planning of prospecting and exploration work in areas known to contain other reserve bearing fields.

In accordance with the Law on Subsoil mineral reserves in Russia are subject to mandatory state examination, a precondition of the granting of a production licence. The state examination of reserves is conducted by subsidiary organisations of the Federal Agency on Subsoil Use, including the State Reserve Commission, Central Reserve Commission and its regional departments. Once a subsoil user is granted an exploration, development or production licence, it is required to file annual reports reflecting changes in reserves. Subsoil users’ reserve reports are submitted annually for examination and approval by the Central Reserve Commission or, if there has been a substantial change in reserves, by the State Reserve Commission.

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 a mix 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 costs as well as the various permits and associated approvals required for pipeline construction. 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.