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Petroneft Resources (PTR)

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Tuesday 21 December, 2021

Petroneft Resources

2021 Reserves & Resource Audit

RNS Number : 2743W
Petroneft Resources PLC
21 December 2021
 

PetroNeft Resources plc

21st December 2021

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

PetroNeft Resources plc ('PetroNeft' or 'the Company')

 

2021 RESERVES & RESOURCE AUDIT

 

PetroNeft (AIM: PTR) an oil and gas exploration and production company, operating in the Tomsk Oblast, Russian Federation and 90% owner and operator of Licence 67 and 50% owner and operator of Licence 61 is pleased to provide the results of the reserves and resource audit, the first undertaken since 2016 for Licence 61, and 2011 for Licence 67.

 

Highlights

· Miller & Lents (M&L), an independent oil and gas consulting firm, have completed the 2021 Reserves & Resource audit for both Licences 61 and 67, link available at: http://petroneft.com/investor-relations/reserve-reports/ This is the first review of reserves and resources in five years on Licence 61 and a decade for Licence 67.

 

· Updated 2P reserves of 48.655 Mbbls and a 2P NPV10 valuation across Licences 61 and 67 of $522.2M net to PTR

All figures in Mbbls

Gross

Net Attributable

Asset Name

Proved

Proved &

Proved

Proved

Proved &

Proved

 

Probable

Probable &

Probable

Probable &

 

 

Possible

 

Possible

Licence 67

4.780

27.214

79.646

4.302

24.493

71.681

Licence 61

24.345

48.325

70.950

12.173

24.163

35.475

Total =

29.125

75.539

150.596

16.475

48.655

107.156

 

 

 

 

NPV10 $(US)M

Gross

Net Attributable

 

Asset Name

Proved

Proved &

Proved

Proved &

 

 

Probable

Probable

 

Licence 67

50.186

281.895

45.167

253.706

 

Licence 61

266.302

536.998

133.151

268.499

 

Total =

316.488

818.893

178.318

522.205

 

                   

 

· Additional 3C Net contingent resource - 23.74 Mbbls

All figures in Mbbls

Gross

Net Attributable

Asset Name

1C

2C

3C

1C

2C

3C

Licence 67

0.566

3.387

24.512

0.509

3.048

22.061

Licence 61

0.499

1.471

3.369

0.250

0.736

1.685

Total =

1.065

4.858

27.881

0.759

3.784

23.745

 

· Significant low risk prospective resource estimate for Licence 61 - Emtorskaya prospect, Gross Pmean 96.19 Mbbls with a geological Chance of Success of 49.7%, and Gross P10 upside of 253.35 Mbbls

 

· The M&L report underlines the importance and value of License 67 for the Company's future, with the 2P and 3P gross reserves largely driven by the newly producing Cheremshanskoye field and further upside now recognised, supporting the Company's new strategy, and added forward focus on License 67

 

M&L has completed its assessment of the Group's petroleum reserves and resources with an effective date of 30th July 2021, in accordance with the standards of the Petroleum Resources Management System, prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE-PRMS). This is the first reserves and resource audit since Ryder Scott completed their assessment in 2016 for Licence 61 and 2011 for Licence 67.

The following is a comparison between the legacy audits carried out by Ryder Scott and the current Miller & Lents report. Such a comparison is partly complicated by updates to the PRMS standards, which have impacted the categorisation of the Emtorskaya prospect in Licence 61.

Table 1: Net reserves comparison between legacy (Ryder Scott) and 2021 (Miller & Lents) audits

All figures in Mbbls

Ryder Scott 2011/16

Miller & Lents 2021

Asset Name

Proved

Proved &

Proved

Proved

Proved &

Proved

 

Probable

Probable &

Probable

Probable &

 

 

Possible

 

Possible

Licence 67

1.500

14.000

17.400

4.302

24.493

71.681

Licence 61

14.170

49.390

86.810

12.173

24.163

35.475

Total =

15.670

63.390

104.210

16.475

48.655

107.156

 

Miller and Lents have also estimated additional net additional Contingent resource (3C) of 23.74 Mbbls (22.06 Mbbls in Licence 67 and 1.68 Mbbls in Licence 61) and net Pmean prospective resources for the Emtorskaya prospect of 48.09 Mbbls (Gross 96.18 Mbbls with a 49.7% geological chance of success).

In Table 2 below, the 2P NPV 10 has increased significantly from $255.716M in 2011/16 to $522.21M as of 30th June 2021. The increased valuation is mainly a reflection of the materially improved long term oil pricing environment both internationally and domestically within Russia since the last report. The total valuation uplift is further increased by the recent acquisition of an additional 40% interest in Licence 67 in 2021.

Table 2: Discounted cashflow (NPV10) comparison between legacy (Ryder Scott) and 2021 (Miller & Lents) audits

Net NPV10 $(US)M

Ryder Scott 2011/16

Miller & Lents 2021

Asset Name

Proved

Proved &

Proved

Proved &

 

Probable

Probable

Licence 67

8.590

76.642

45.167

253.706

Licence 61

55.409

179.074

133.151

268.499

Total =

63.999

255.716

178.318

522.205

Note: Ryder Scott L67 at 50%, Miller & Lents L67 at 90%

 

 

While full copies of the actual reserve reports, which are by operational unit on a gross and net attributable basis, can be downloaded by clicking on the following link  http://petroneft.com/investor-relations/reserve-reports/ , below is a management summary of the audit results.

 

David Sturt, CEO PetroNeft commented:

'We are delighted to be able to finally publish the results from our recent reserves and resource audit.

This has been a painstaking interactive process and we are pleased to have engaged Miller & Lents due to their depth of expertise and considerable experience of working with significant Russian oil operators, some with assets near our licenses and fields that are likely analogous to ours.

We feel the audit results fully supports our on-going strategy, with the Cheremshanskoye field on License 67 providing the most exciting near-term upside for our continued growth, reflected in the strong reserves numbers, which are all new and not reported at all in the last reserves audit.

On License 61, it is satisfying to see the exciting upside and running room potential of our northern hub, particularly at Emtorskaya, beginning to show through numerically. An extensive inventory of reserves remains at our other License 61 fields. Whilst comparison with the 2016 report is not straightforward due to the evolution of assessment methodology which has become more rigorous in the intervening years of production, we are satisfied that the latest audit gives a suitably robust view of our reserve base and wish to thank Miller & Lents for their thoroughness and professionalism. 

The NPV10 valuation of our 2P reserves of over $520M is a clear indicator of our material value proposition, and we will continue to focus on building our production and cashflow to deliver the underlying values of our assets to our shareholders.'

 

Licence 67

PTR own and operate a 90% interest in the licence. The last reserves audit was carried out by Ryder Scott from existing legacy data in 2011, just after the award of the licence. Since then, the C-3 and C-4 wells on the Cheremshanskoye field and the L-2a well on the Ledovoye field have been drilled. Due to improved oil prices and cost optimisation initiatives, the 2P NPV10 per barrel has increased from approximately $3.50/bbl in 2011 to approximately $10.36/bbl in 2021.

Table 3: Licence 67 - Net Reserves and Cash flow value (NPV 10 ), as of 30th June 2021

All reserve figures in Mbbls

Gross

Net Attributable

Licence 67

Reservoir

Proved

Proved &

Proved

Proved

Proved &

Proved

Fields

 

Probable

Probable &

Probable

Probable &

 

 

 

Possible

 

Possible

Cheremshanskoye

U. Jurassic

4.556

22.900

34.467

4.100

20.610

31.020

 

L. Jurassic

0.067

0.244

17.589

0.060

0.220

15.830

Ledovoye

U. Jurassic

0.156

4.067

27.600

0.140

3.660

24.840

Total Reserve =

4.778

27.211

79.656

4.300

24.490

71.690

Total NPV 10 $M=

50.189

281.900

 

45.170

253.710

 

NPV10 $/bbl =

10.50

10.36

 

10.50

10.36

 

 

Cheremshanskoye Field

There were no reserves calculated for this field by Ryder Scott in 2011. Since the last audit the C-3 and C-4 wells have been successfully drilled with the C-4 well currently producing.

The results demonstrate sizeable and well-defined reserves in two reservoirs (J1 ad J14) of the main Upper Jurassic zone, currently producing in the C-4 well. In addition, recognition is also made of the upside potential within the Lower Jurassic Tyumen formation with 15.83 Mbbls 3P net reserves, albeit with very modest 1P and 2P numbers at this early stage. The Tyumen formation is an economically attractive target as any production qualifies for a 20% reduction in the Mineral Extraction Tax.

 

Ledovoye Field

The field was last audited in 2011 soon after the licence award and before the acquisition of the 3D seismic data with a net 2P reserve of 14.0 Mbbls. Since then, the L2a well was drilled in 2012, which encountered oil but with a higher Oil Water Contact. This created uncertainty about the precise location of the Oil Water Contact, which has led to a significant portion of the 2P reserves now being moved to 3P with the 2P net reserve reduced from 14Mbbls in 2011 to the current 3.66Mbbls

Following the successful re-entry of the L-2a well earlier this year and the recovery of oil to surface on test, we are evaluating forward options for this field.

 

Licence 61

PTR own a 50% operated interest in the licence which was last audited by Ryder Scott in 2016.  The NPV 10 per barrel has increased from approximately $3.50/bbl in 2016 to over $11.00/bbl on a 2P basis.

Table 4: Licence 61 - Net Reserves and Cash flow value (NPV 10 ), as of 30th June 2021

All reserve figures in Mbbls

Gross

Net Attributable

Licence 61

Reservoir

Proved

Proved &

Proved

Proved

Proved &

Proved

Fields

 

Probable

Probable &

Probable

Probable &

 

 

 

Possible

 

Possible

Lineynoye incl. west

U. Jurassic

7.380

16.280

16.920

3.690

8.140

8.460

Arbuzovskoye

U. Jurassic

5.060

6.180

7.800

2.530

3.090

3.900

Sibkrayevskoye

U. Jurassic

11.700

24.160

42.520

5.850

12.080

21.260

Tungolskoye

U. Jurassic

0.180

1.560

3.480

0.090

0.780

1.740

Kondrashevskoye

U. Jurassic

0.020

0.160

0.240

0.010

0.080

0.120

Total Reserve =

24.340

48.340

70.960

12.170

24.170

35.480

Total NPV 10 $M=

266.300

537.000

 

133.150

268.500

 

NPV10 $/bbl =

10.94

11.11

 

10.94

11.11

 

 

Lineynoye & West Lineynoye Field

There is a reduction of 2P reserves on a net basis of 4Mbbls, this is due to a more rigorous well log interpretation reducing overall net pay. Recent engineering studies based on historical production (material balance calculations) provided a degree of verification of the new volumes calculated.

This field cluster is a key producing asset of the Company. The production wells at Pad 1 continue to perform well, with three producing over 700,000 bbls and two more over 300,000 bbls cumulative production to date. The recent re-frac of the L-115 well has proven highly successful, with additional wells planned to be fracked this winter (Q1 2022).

 

Sibkrayevskoye Field

The unsuccessful drilling of two appraisal / development wells (S-374 and S-375) in 2016 and 2017 has resulted in a significant reduction  of 2P reserves at this field compared to the 2016 report, with the southern extension of the field being written off.

Despite this, management remains very confident that this field will continue to provide an engine room for production growth and are particularly enthusiastic regarding last year's frac of the S-373 well having added more than 500 bopd post frac. While the field still has a substantial reserve base and future upside, management focus will be on the further development of the frac programme, which is expected to provide a continuing and growing revenue stream.  The earlier unsuccessful drilling results have confirmed management's view of the pitfalls of drilling certain development wells, prior to 3D seismic and therefore no further drilling is anticipated to take place prior to 3D seismic.

 

Arbuzovskoye Field

There has been a small 0.36 Mbbls net reduction in 2P reserve, but we are pleased to see a 1.6Mbbls net increase in 1P reserves due to the drilling of the horizontal wells at PAD 2 in 2016.

The performance of these two horizontal wells has been excellent, with the A-214 Hz well recovering 750,000 bbls and the A-215 Hz well recovering almost 400,000 bbls.

 

Tungolskoye Field

There has been a reduction of 2Mbbls (net) of 2P reserves due to the poor performance of the wells drilled in 2015 when four horizontal and four vertical wells were drilled. Initial rates on the horizontal wells were very encouraging with rates over 500 bopd but declined rapidly. As reported earlier, the field was suspended in early 2019 due to low flow rates leading to non-commercial production.  There are plans to re-enter the T-501 horizontal well during this coming winter season, and if successful, the program could expand. Upon success, we would expect reserve numbers to increase at the next reserve audit.

 

Emtorskaya Prospect

The Emtorskaya prospect sits on the northern margin of the licence up dip and between the Lineynoye field to the south and the Sibkrayevskoye field to the east. This prospect provides material risked upside for License 61.

Table 5: Licence 61 - Gross Unrisked Prospective Resources (M&L), as of 30th June 2021

Prospect

Gross

Net Attributable

P90

P50

Pmean

P10

P90

P50

Pmean

P10

Mbbls

Mbbls

Mbbls

Mbbls

Mbbls

Mbbls

Mbbls

Mbbls

Emtorskaya

10.50

55.52

96.18

253.35

5.25

27.76

48.09

126.68

Geological Chance of Success = 49.7%

 

The prospect was also evaluated in 2016 by Ryder Scott, but due to changes in assessment methodology associated with reserve audit regulations, direct comparison is not straightforward.  PTR believes the 2016 P3 figure of 46.78 Mbbls as not fully reflecting the more robust upside seen with additional in-house integrated evaluation of legacy wells in the vicinity and newer 2D seismic data.

M&L estimated the (gross) Pmean of 96.18 Mbbls with an estimated geological chance of success of 49.7% which PTR believes is a more accurate reflection of the potential value of the prospect to the Company.

 

In 2016, the Company also had 11 prospects in the southern part of the licence audited by Ryder Scott as potential prospective resources. This portfolio of dependent prospects presents future significant upside unrisked gross potential of ca.287Mbbls.  However, as very little new information is available on these prospects since the last audit, combined with the operational focus of the value creation being around existing fields and the northern hub, a decision was taken to exclude this resource in the current audit report.

 

For further information, contact:

David Sturt, CEO, PetroNeft Resources plc

+44 7903 869 608

John Frain / Ciara O'Mongain, Davy (NOMAD and Joint Broker) 

+353 1 679 6363

Joe Heron / Douglas Keatinge, Murray Consultants

+353 1 498 0300

 

Notes and Glossary

 

These assessments are made in accordance with the standards defined in the Petroleum Resources Management System (Revised June 2018) jointly sponsored by SPE, WPC, AAPG, SPEE, SEG, SPWLA, and EAGE.

 

The information contained in this announcement has been reviewed and verified by Mr. David Sturt, Chief Executive Officer and Executive Director 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. Sturt holds a B.Sc. Degree in Earth Sciences from Kingston University and an MSc. in Exploration Geophysics from The University of Leeds. He is a member of the Petroleum Exploration Society Great Britain and has over 35 years' experience in oil and gas exploration and development.

 

 

1P

Proved Reserves, those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations.

2P

Proved + Probable Reserves, those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves

3P

Proved + Probable + Possible Reserves, those additional reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves.

$M

US $ Million

NPV 10

Net Present Value discounting at 10%.

P10 / P50 / P90 / Pmean

A probability methodology used to describe the size of the Reserves in a Field or resources in a prospect.

PRMS

Petroleum Resource Management System of reserve and resource classification under the Society of Petroleum Engineers (PRMS-SPE)

U. Jurassic

Upper Jurassic

L. Jurassic

Lower Jurassic

3C

Contingent Resource category 3 (PRMS-SPE)

bbl

Barrel

Mbbls

Millions of barrels

3D

Three Dimensional

Hz

Horizontal

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation and is disclosed in accordance with the Issuer's obligations under Article 17 of the Market Abuse Regulations

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