Operational update
January 27, 2010
Continued good progress with Licence 61 development
PetroNeft Resources plc (AIM: PTR) owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to provide an update on its operations.
Highlights:
- Pipeline construction on schedule for completion in April 2010
- Drilling rig onsite and rig-up underway, first of nine development well program to spud in April
- Equipment procurement and mobilisation ongoing as planned
- Appointment of new Vice President of Business Development and Operations
Pipeline
The survey, design and preparatory work on the new pipeline route from Lineynoye to Kiev-Eganskoye has been completed. Pipeline construction activities will commence on schedule in early February and is expected to be completed during April 2010. Final hydro-pressure testing of the line is scheduled for June 2010.
Drilling rig and field facilities
The drilling rig has been successfully mobilised to the Lineynoye Pad A site and rig-up operations are underway. Rig-up and commissioning is scheduled to take approximately 8 weeks with spudding of the first well of the 2010 nine well development drilling program anticipated in early April 2010.
Various equipment items required for the field facilities at Lineynoye are also being delivered to the field, in time for the commencement of construction in March 2010.
Senior management appointment
On 1 January 2010 Karl D. Johnson was appointed as Vice-President of Business Development and Operations. Karl comes to PetroNeft after a 27 year career with Marathon Oil Company. Karl has a strong background in Business Development, Operations and Economics. He also has extensive Russian experience having lived and worked in both Moscow and Yuzhno-Sakhalinsk. He has a BS degree in Petroleum Engineering from Marietta College, Marietta, Ohio, USA and an MBA from Rice University, Houston, Texas, USA.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:
"We are very pleased to be off to such a good start in 2010. All aspects of the project are on or ahead of schedule which is a credit to our staff and contractors in Tomsk. I am looking forward to a transformational year for PetroNeft with the commencement of year-round production in Q3 2010 and meeting our production target of approximately 4,000 bopd by the end of 2010.
We are delighted to welcome Karl Johnson to PetroNeft. His extensive experience in Russian Business Development and Operations will greatly assist the Company in its ambitious growth plans."
For further information, contact:
| Dennis Francis, CEO, PetroNeft Resources plc | +1 713 988 2500 |
| 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 |
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 Licence 61, 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. In December 2009 the Company announced the acquisition of a second oil and gas licence in the Tomsk Oblast in Russia, Licence 67.
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.
