Operational Update

RNS Number : 8857I

Petroneft Resources PLC

14 December 2015

 



14 December 2015

PetroNeft Resources plc

("PetroNeft" or the "Group" or the "Company")

Operations Update

PetroNeft (AIM: PTR) an oil & gas exploration and production company operating in the Tomsk Oblast, Russian Federation, and 50% owner and operator of Licences 61 and 67 is pleased to provide an update on operations at Licence 61. 

Highlights

Tungolskoye

•   T-501 and T-505 horizontal wells drilled. Logs suggest both to have better quality oil pay than earlier wells. Workovers in progress to improve initial flow rates.

•   T-509 vertical injector well drilled. Potential for oil production before conversion to be tested.

Arbuzovskoye

·     Workover programme to increase production is planned for January 2016.

·     Southern portion development progressing with well pad currently under construction.

·     Significant field reserve upgrade anticipated based on new well and seismic data.

Sibkrayevskoye Reserves

·     Oil in Place estimates upgraded based on new seismic data; 2P reserves expected to increase significantly.

Production

•    Current gross production from Licence 61 is about 2,500 bopd.

•    This represents a 40% increase in production in 2015.

Tungolskoye Development

The T-501 well at Tungolskoye was completed at a depth of approximately -2,500 metres TVD with a horizontal segment of 997 metres in the Upper Jurassic horizon of which approximately 590 metres is in effective net pay. The log data suggests that the oil pay is of better quality than that encountered in earlier wells. After the well was brought online the pressure depleted quickly and the well could not sustain continuous production.  We believe this to be due to some formation damage in the horizontal section caused during the drilling process and so performed a workover on the well, flushing the horizontal segment.  Following this, the well operated continuously at about 190 bopd.  However, based on the log data, we expected the well to be similar to if not better than the T-503 and T-502 horizontal wells which achieved initial flow rates of close to 500 bopd. We therefore did an acid bath on the horizontal segment to further eliminate potential formation damage.  The well is currently cleaning up following this second workover and will take a few weeks to reach a stabilized rate.

The T-505 well at Tungolskoye has been completed at a depth of approximately -2,508 metres TVD with a horizontal segment of 466 metres in the Upper Jurassic horizon of which approximately 265 metres is effective net pay. When the well was brought online we experienced similar flow problems to the T-501 well.  The well is currently being worked over to clean the horizontal section and flush the well bore, with stabilized production anticipated in January 2016.

The T-509 vertical injection well has also been drilled.  The top of the J1-1 reservoir was penetrated a depth of -2,517 m TVD.  The well is interpreted to have about 8.1 m of oil + water pay in the J1-1 and J1-2 intervals.  We plan to test these intervals to see if they will flow oil before making the decision to convert the well to the water injector planned to provide pressure support for the T-505 and T-501 horizontal wells. 

The drilling programme at Tungolskoye is now complete.

Arbuzovskoye Development

Production from the new wells drilled at Arbuzovskoye earlier this year has declined more than expected.  We believe this is due to migration of fine particles within the reservoir, partially plugging the perforations near the well bore.  We have experienced this in the past at Arbuzovskoye and have had very good results by simply re-perforating wells.  We are now planning a batch workover of these wells in January 2016.

The size of the southern portion of the Arbuzovskoye field has increased significantly based on the new well and seismic data acquired earlier this year.  Internal calculations indicate that the current 2P reserves of 6.54 million bbls for Arbuzovskoye are likely to increase by more than 50% to over 10 million bbls with the yearend reserves audit.  We are now planning the development of the southern portion of the field which will include a new pad with 4 km pipeline and utility line tie in to Pad 1.  We are planning up to three horizontal wells and one vertical well for the development.  The well pad is currently under construction.

Given the thicker pays and good quality reservoir rock that we have seen at Arbuzovskoye we are targeting superior results at the south Arbuzovskoye pad in 2016.

Sibkrayevskoye Status

LLC "Sibneftegeofizika" have completed their seismic and well data processing and interpretation studies at the Sibkrayevskoye oil field and have prepared the "Resource Passport" for the field.  This comprehensive document will serve as the basis for the Russian State (GKZ) Reserve Registration as well as the Company's 2P reserves.  Their estimation for C3 Resources Original Oil-in-Place (OOIP) is 361.84 million bbls. 

The next step in field development will be to convert the C3 Resources into C1+C2 Reserves and have them approved and registered by GKZ.  The Company's 2Preserves will also be recalculated at the end of the year.  The current gross 2P reserves at Sibkrayevskoye are 53 million bbls and, even allowing for the different methodologies used in the calculation of reserves, suggests a very positive upgrade to the reserve level at Sibkrayevskoye.

Production

Current gross production at Licence 61 is about 2,500 bopd.  While an over 40% production uplift in 2015 to date, it is below our expectations because of the delays in bringing the Tungolskoye T-501 and T-505 wells into production and the greater than expected declines from the Arbuzovskoye wells drilled earlier this year.  We are implementing workover programmes designed to address these issues and expect to see production begin to improve shortly.

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

"We are generally pleased with our ability to drill horizontal wells at Tungolskoye which will be a key element of optimising recovery of existing reserves and successful execution of new developments in Licence 61.  While the initial results of the last two horizontal wells have been disappointing, we believe the results can be improved at minimal costs with the planned workovers and acid treatment of the reservoir.

We are now preparing for the development of South Arbuzovskoye next year with construction of Pad 2 from where we expect better flow rates from the horizontal wells and good economics, even at the current low oil prices. Production has increased by over 40% in 2015 and we will continue to focus on production growth."

For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc	[phone]
Paul Dowling, CFO, PetroNeft Resources plc	[phone]
John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker)	[phone]
Henry Fitzgerald-O'Connor, Canaccord Genuity Limited (Joint Broker)	[phone]
Martin Jackson/Shabnam Bashir, Citigate Dewe Rogerson	[phone]
Joe Heron / Douglas Keatinge, Murray Consultants	[phone]

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 and Oil & 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 40 years' experience in oil and gas exploration and development.

Glossary

bopd	Barrels of oil per day
TVD	True vertical depth
2P	Proved and probable reserves according to SPE/PRMS standards
C1	Proved reserves according to Russian (GKZ) standards
C2	Probable reserves according to Russian (GKZ) standards
C3	Possible resources according to Russian (GKZ) standards
km	kilometres

 

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