Operations Update
April 4, 2011
PetroNeft Resources plc
(“PetroNeft” or the “Group” or the “Company”)
Operations Update
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
- Hydraulic fracturing programme completed successfully
- Target production now estimated to be between 7,000 and 8,000 bopd at end of Q1 2012
- First and second production wells in 2011 development programme successfully drilled - first well encounters thickest net pay interval to date
- Five well exploration drilling programme targeting 120 mmbbls to commence in April
Licence 61 Hydraulic fracturing programme
The hydraulic fracturing of nine wells at Pad 1 at the Lineynoye oil field was completed successfully in February 2011. All of the fracture stimulated wells have been returned to production and cleaned-up. Current production from the nine wells is approximately 3,000 bopd; this does not include the Lineynoye No. 1 or No. 6 wells which are currently offline for operational reasons.
In the Lineynoye No.1 well, which was drilled in 1972, the diameter of the well casing is too small to accommodate an Electrical Submersible Pump (ESP) and a special order screw pump was purchased for the well. This pump is currently being installed. The well produced around 275 bopd on natural flow during pilot production in 2009, but production from the well has been minimal this past year because it could not flow naturally against the back pressure of the process system caused by the ESPs in the other wells. The screw pump should remedy this issue.
Repair of a casing hole in Lineynoye No.6 well has just been completed and an ESP is currently being re-installed. This well had previously produced around 200 bopd.
Both Lineynoye No. 1 and No. 6 are anticipated to be back on line within the month.
We are satisfied with the results of the fracture stimulation programme and the performance of the fracture stimulated wells to date and remain highly confident with regard to our understanding of both geology and reservoir quality in Licence 61. The results of this programme will enable us to refine our plans for future activities, especially with regard to the size of the frac and the time required to return wells to production following the fracture stimulation. Current plans are to fracture stimulate up to 8 of the 17 new development wells being drilled in 2011 this summer using a heli-frac crew. To this end we have purchased the necessary proppant and frac tubing and already moved these items to the field by winter road. In addition, we have also recently purchased a new workover rig, which will be staffed with our own crew, and speed up workovers and their quality in the future.
Given our recent experience, we have felt it prudent to take a more conservative view regarding the future production profile taking into account of the attendant variables for the timing of bringing wells online and the timing of the hydraulic fracturing of new wells. Therefore the Company is now targeting a range of between 7,000 and 8,000 bopd by the end of Q1 2012 when all of the 17 new wells being drilled in the 2011 campaign, together with the 11 existing wells, will have been fracture stimulated and returned to production.
2011 Licence 61 Development programme – Lineynoye oil field
Production drilling at Pad 2 has commenced and the 201 and 202 wells successfully drilled and cased. Preliminary log and survey data indicate that well 201 encountered the thickest net pay interval to date in the drilling programme.
| Well No. | Top of reservoir vertical depth subsea, metres |
Gross hydrocarbon interval, metres |
Net oil pay, metres |
Comments |
|---|---|---|---|---|
| 201 | 2,405 | 21.9 | 18.1 | Interval is completely saturated with oil. |
| 202 | 2,404 | 14.2 | 8.2 | Interval is completely saturated with oil. |
The rig for Pad 3 and all materials have been mobilised to site and rig-up is about 25% complete. The first well should spud in late April.
Works to tie-in Pads 2 and 3 to the existing central processing facility are ongoing and it is expected that this work will be completed in May 2011 thereby allowing new wells to be brought swiftly into production. All of the major equipment and materials necessary to expand the central processing facility from 7,400 bpd to 14,800 bpd have been delivered to site and this work is proceeding to schedule and is expected to be completed by July 2011.
2011 Licence 61 Exploration programme
PetroNeft’s high impact 2011 exploration programme, which has the potential to more than double our reserves this year, will target over 60 million barrels across three prospects in Licence 61. The first of these, Kondrashevskoye No. 2 well, should spud in late April; site preparation is complete, the rig has been mobilised to location and rig-up is underway. The second well in the schedule at Sibkrayevskaya No. 372 will target the largest prospect in the programme at over 40 million barrels. At present, site preparation and mobilisation of the rig and materials is complete and rig-up operations are planned to start in late April for a June spud. The site for the North Varyakhskaya No. 1 well has also been prepared and the rig and materials are being moved to the site. This well will be the last exploration well drilled at Licence 61 in 2011 with a planned spud in July.
2011 Licence 67 Exploration programme
The drilling tender for the two exploration wells to be drilled in 2011 in Licence 67 is currently underway. This programme will also target over 60 million barrels. The two wells, Cheremshanskaya No. 3 and Ledovoye No. 2a, are located close to existing all weather roads and will be drilled in the second half of the year following the Licence 61 exploration wells. Mobilisation of equipment for the construction of the Cheremshanskaya site has commenced.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented
“We are pleased with the results of our nine well fracture stimulation programme but we have learned from the programme and feel we can improve on both the design and efficiency in our future drilling and frac programmes.
Based on these results we have taken a more conservative approach to our production profile and are targeting a range from 7,000 to 8,000 bopd by the end of Q1 2012. The Company has a very significant reserve base which we are only just starting to develop and the key for sustained production growth in the coming years will be to continue to build the stock of producing wells, in the most cost efficient manner.
Part of the process is implementing our Lessons Learned and continuous review of the development sequence based on new discoveries. Provided we do these tasks well the future of the Company looks very good and we will build significant production and cash flow profiles over the next 5 years.”
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 |
| Charles Berkeley / Henry Fitzgerald-O’Connor, Canaccord Genuity 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 March 2006. 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 35 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
| 2P | Proved and probable reserves according to SPE/PRMS standards |
| 3P | Proved, probable and possible reserves according to SPE/PRMS standards |
| API gravity | The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. |
| bopd | Barrels of oil per day |
| km | Kilometres |
| mmbbl | Millions of barrels |
| P1 | Proved reserves according to SPE/PRMS standards |
| P2 | Probable reserves according to SPE/PRMS standards |
| P3 | Possible reserves according to SPE/PRMS standards |
| P4 | Exploration resources according to SPE/PRMS standards |
