PetroNeft, owner and operator of Licenses 61 and 67, Tomsk Oblast, Russian Federation, provided an update on its operations.
License 61 Exploration / Delineation Program
PetroNeft's high impact 2011 exploration program, which has the potential to more than double our reserves, is targeting over 60 million barrels on three prospects in License 61.
The first well in the program, the Kondrashevskoye No. 2 delineation well, has been drilled and has confirmed 2.3 m of net pay in the J1 interval. This is consistent with the No. 1 well which discovered the oil field in 2008. The well tested high quality 41° API gravity crude oil at a prorated inflow rate of 32 bopd on a short open hole test (without stimulation). The well was then drilled to basement and a core taken to meet government regulations.
Neither Kondrashevskoye well has encountered the oil water contact for the field so we will now sidetrack the No. 2 well down-dip to locate the oil water contact and determine the full reserve potential of the field. This process in now underway and is expected to be completed by the end of June.
The second 2011 exploration well will be at Sibkrayevskaya, the largest prospect in the program at over 40 million barrels. Site preparation and mobilization of the rig and materials is complete and rig-up operations are well advanced. Drilling should start in late June, following completion of the Kondrashevskoye No. 2 sidetrack.
The site for the third exploration well, North Varyakhskaya No. 1, has also been prepared and the rig and materials have been moved to the site for a planned spud in August 2011 following Sibkrayevskaya.
2011 License 61 Development program - Lineynoye oil field
Production drilling continues with three additional wells successfully drilled from Pad 2, making a total of 5 thus far and the first well from Pad 3. Preliminary log and survey data for the development wells on Pads 2 and 3 are shown below, with Well 204 having the largest gross sand interval in the J1 section to date.
The primary objective for Well 203 was encountered deeper than anticipated and close to the oil-water contact for the field. The well was then side-tracked up-dip to the planned 204 location. The sidetrack well (203s) contained 2.0m of oil in the J1-1 interval with good oil saturation (65%), but the J1-2 sandstone interval was not developed in this location.
As a result of the information learned from Wells 203 and 203s, we have re-evaluated the seismic data for the Lineynoye Field. The resulting new interpretation clearly connects Pads 1 and 2 to the West Lineynoye field to the north where previously it had been thought they were separate structures. While this has positive implications for reserve and production performance from these areas of the field, the data also suggests that net pay in the planned Pad 3 wells is likely to be thinner than previously anticipated. Wells 204 and 205, which were drilled after the new structural interpretation have confirmed the revised mapping and shown that the area of thicker pays extends significantly further north than originally thought. This, together with the results of Well 334, will likely add extra wells to the Pad 2 program and reduce the number of wells to be located at Pad 3.
Due to the poor condition of the well bore in the original Lineynoye No. 1 discovery well (drilled in 1972) and the high quality reservoir characteristics at this location we have decided to drill a new production well adjacent to the L-1 location from Pad 2 at the end of the Pad 2 program. A modern well will allow effective production and drainage of this portion of the field through the use of a modern electric submersible pump and the application of hydraulic fracturing.
Production is currently about 2,500 bopd with the primary contribution coming from 7 of the 9 wells drilled last year with workovers to be carried out on the two poorest performing wells later in the year. New wells will now be tied-in but we do not anticipate significant production increases until some of the new wells can be fracture stimulated later this summer by a heli-frac crew.
License 61 Facilities Construction and Tie-in
The connection of Pads 2 and 3 to the existing central processing facility is complete and new wells being prepared for tie-in to the process facilities. Work to expand the central processing facility from 7,400 bfpd to 14,800 bfpd is expected to be completed on schedule by mid July.
2011 License 67 Exploration program
The drilling tender for the two exploration wells to be drilled in 2011 in License 67 has been completed and the contract was awarded to LLC "Tomskburneftegaz" (TBNG). In accordance with AIM Rule 13 and ESM Rule 13, the drilling contracts are deemed to be a related party transaction as Vakha Sobraliev, a Non-Executive director of the Company, is principal owner of TBNG.
The Board of Directors, with the exception of Vakha Sobraliev who is involved in the transaction as a related party, having consulted with Davy, the Company's Nominated Adviser and ESM adviser, have determined that the terms of the drilling contracts are fair and reasonable insofar as shareholders are concerned.
The two exploration wells, Cheremshanskaya No. 3 and Ledovoye No. 2a, are located close to existing all year round roads and will be drilled in the second half of the year following the License 61 exploration wells, utilizing the same drilling crew. We have already mobilized equipment and completed construction of the Cheremshanskaya site and the rig is now being mobilized by barge to a nearby river port. Construction of the site for the Ledovoye No 2a well will begin shortly and drilling will commence following completion of Cheremshanskaya No. 3.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented, "We are delighted that the Kondrashevskoye No. 2 well has further proved up the Kondrashevskoye oil field and look forward to the additional data that the deviated portion of the well will provide. This oil field is one of the candidates for production drilling and tie-in during 2012.
"The development program is well underway and we have learned a lot from the drilling to date. The Lineynoye oil field extends further north and has thicker oil pays than previously thought whereas the Pad 3 area has some thinner pays. We will continue to dynamically adjust the drilling and completion program to ensure the optimum long term reserve and production outcome for Lineynoye and the surrounding discoveries."
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