First production well spudded ahead of schedule
March 23, 2010
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:
- First of€nine production wells spudded 3€weeks ahead of€schedule
- Pipeline construction on€schedule and within budget
- Equipment procurement and mobilisation nearing completion
- First year-round production scheduled for Q3
Production drilling
PetroNeft announces that the first of€its nine planned production wells to€be€drilled in€2010 has been spudded at€the Lineynoye oil field in€Licence€61, approximately 3€weeks ahead of€schedule.
The 2010 production drilling programme will involve the drilling of€9€wells from the current location utilising a€rail-mounted production drilling rig designed to€facilitate the drilling of€multiple deviated wells with close spacing at€the surface.
Once the first well is€drilled and cased, the drilling rig will move five metres along its rails and immediately commence drilling the second well of€the programme. This will be€repeated for the third well, after which the rig will be€skidded 15€metres to€drill the fourth well while a€workover rig completes the first three wells and installs electric submersible pumps ("ESPs"). Thereafter a€fifteen metre skid will be€inserted after the fifth and seventh wells to€allow pairs of€wells to€be€completed together, thereby optimising both the timing of€wells coming on€production and the size of€the drilling pad.
All tubulars, supplies and consumables for the 9€well production drilling programme are also on€site.
First production at€the Lineynoye oil field remains scheduled for the third quarter of€2010.
Pipeline
Construction of€the 60km pipeline from Lineynoye to€Kiev-Eganskoye is€progressing to€plan. All of€the pipe has been laid out along the route and construction of€the pipeline is€due for completion in€mid April, well within the weather window required for this work. Final hydro-pressure testing of€the line is€scheduled for June 2010.
Field facilities
Most of€the equipment required for construction of€field facilities at€Lineynoye has been procured and mobilised to€location. This process should be€complete by€the end of€March. Construction of€these facilities has commenced and is€due for completion in€time to€commence year-round production in€the third quarter of€2010. The facilities include basic oil processing, oil storage, gas powered generation and communications systems as€well as€improved and enlarged crew accommodation and catering facilities.
Dennis Francis, Chief Executive Officer of€PetroNeft Resources plc commented:
"Thanks to€the efficient and carefully synchronised planning of€our infrastructure and drilling programmes and the commitment of€our staff and contractors over the winter, all aspects of€the Lineynoye Field development project are progressing on€or€ahead of€schedule. Spudding of€our first production well was an€important milestone and boosts our confidence that we€will commence year-round production in€Q3€and achieve the initial target production of€approximately 4,000 bopd by€the end 2010."
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.
