Kulczyk Oil announced that total gas production on its properties in Ukraine has increased by 70% to more than 10 million cubic feet per day ("MMcf/d") (more than 7 MMcf/d net to KOV), as a result of the tie-in of the M-19 discovery well in the Makeevskoye Field.
Timothy M. Elliott, the President and Chief Executive Officer of KOV, stated that "we have substantially increased production from our Ukraine assets since closing the acquisition in June 2010 and are very pleased that KUB-Gas is already producing more than 10 MMcf/d before the end of July. We are confident that we will meet or exceed our target of exiting 2011 with a production rate for KUB-Gas of 12 MMcf/d (8.4 MMcf/d net to KOV). KOV will continue with its active development program in the Ukraine during the coming year and we expect to have a number of new locations defined once the 3D seismic surveys recently completed at Makeevskoye and Olgovskoye are processed and interpreted. The successful start-up of gas production from the newly discovered zone in the M-19 well has confirmed the effectiveness of modern seismic interpretation techniques in the identification of new exploration targets".
The M-19 well
The M-19 exploration well was drilled in the second half of 2010 to a total depth of 2,060 metres and tested gas at a rate of approximately 5 MMcf/d in January 2011 before being suspended pending completion of a pipeline to tie the well to the production facilities of KUB-Gas LLC ("KUB-Gas"). The pipeline was completed and all regulatory approvals required for the commercial production of the well were obtained prior to the start of production on July 11, 2011.
Average gas production from the M-19 well was 5.52 MMcf/d (3.86 MMcf/d net to KOV) since the first full day of production on July 11, 2011. It is presently anticipated that production rates from the well will stabilize at a lower rate and average about 4.0 MMcf/d for the remainder of 2011. The successful tie-in of the M-19 well to production facilities has increased total KUB-Gas production from its four producing gas licenses in Ukraine to an average of 10.73 MMcf/d (7.51 MMcf/d net KOV) during the 10 producing days ended July 24th.
The estimated selling price per thousand cubic feet ("Mcf") in the second quarter of 2011 was approximately US $9.00 per Mcf with as estimated netback of US $5.80. The netback during the first quarter of 2011 was US $4.77 per Mcf. The final financial information with respect to the second quarter will be released in mid-August.
The M-19 well was the first well operated by KUB-Gas logged with western logging tools. By comparing the Ukrainian and western logging data over the same formations, the Company is developing a methodology to better understand and analyze existing Ukrainian log data with a view to more effectively evaluating the potential of the area.
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