Ledovy Licence registered, Arawak Energy to partner in Licence

February 1, 2010

PetroNeft Resources plc (AIM: PTR), owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to announce that Arawak Energy Limited ("Arawak") has exercised its option to acquire a 50% interest in the Ledovy Licence (Licence 67).


  • Arawak to acquire 50% interest in the Licence
  • Ledovy Licence registered for 25 years
  • PetroNeft to remain as operator
  • 2010 work programme being finalised

In December 2009 PetroNeft announced that it had been successful in the state auction for the Ledovy Licence in the Tomsk Oblast. Under a 2008 Area of Mutual Interest Agreement ("AMI") Arawak Energy Limited is entitled to participate in up to a 50 percent interest in the Licence. Following technical and commercial review Arawak has elected to acquire its full 50% entitlement, subject to the completion of a mutually agreeable contract under the terms of the AMI.

PetroNeft will remain as operator of the Ledovy Licence and all costs and future income will be shared on a 50:50 basis.

Licence 67

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.

Exploration on the Ledovy Licence began in the 1950s with a total of 8 wells being drilled on large prospects identified by vintage seismic data. Modern 2D seismic data was subsequently acquired from 1980 to 2001. 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 Licence area. Two of the previously drilled structures, Ledovoye and Sklonavaya, have tested oil but have not yet been assigned reserves. PetroNeft believes that these discoveries have potential to form the basis of a future development project in the Licence, but it is also intended to pursue an active exploration programme. Russian registered C3 (possible) resources are currently 55 million barrels.

2010 Work Programme

The Licence, which was registered on 27 January 2010, is a 25 year exploration and production licence. The initial work commitments are to, within the first 3 years, reprocess old seismic and well data, acquire 750 km of new seismic data and drill at least 1 well. During 2010, work will focus on the overall re-evaluation of all previous well and seismic data within the Licence area utilising the latest technology. This re-evaluation will allow PetroNeft to optimally target new seismic data acquisition during winter 2010/11 to determine the exploration priorities and rank individual prospects for future drilling. It is also possible that some of the old wells could become workover candidates. This analysis will also form part of the 2010 work programme.

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

"We are delighted that Arawak have decided to partner with us in Licence 67. Their quick decision is an important and encouraging technical endorsement of the potential of Licence 67. Work has already commenced and we look forward to working with Arawak on this and other projects in the Tomsk Region".

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

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. 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 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.