Kulczyk Oil Tests Gas from Ukraine Well at 8.1 MMcf/d

Kulczyk Oil reported that the Olgovskoye-12 ("O-12") well has been production tested at a maximum rate of 8.1 million cubic feet per day ("MMcf/d"). The well is operated by KUB-Gas LLC ("KUB-Gas"), a partially-owned subsidiary in which KOV has a 70% effective ownership interest. It is expected to be tied-in for commercial production later in Q4 2011.

Highlights

  • O-12 well tests gas at 8.1 MMcf/d (5.7 MMcf/d net to KOV);
  • O-12 well to be tied-in for commercial production prior to year end;
  • Seismic defines additional drilling opportunities in the Olgovskoye, Makeevskoye, and North Makeevskoye license areas.

Olgovskoye-12

The O-12 well reached a total depth ("TD") of 2,700 meters in early September 2011 and cased to TD as a potential gas producer. The well was designed to test gas-bearing reservoirs in the Muscovian and Bashkirian sections and to further develop the gas production capability of the Olgovskoye Field. Interpretation of wireline logs indicated between 21 and 39 meters of potential gas pay in 8 potential zones.. A 10 meter zone in the Middle Bashkirian was perforated and production tested at a maximum rate of 8.1 MMcf/d on a 10 mm choke.

The location for the O-12 well was identified after interpretation of 2D seismic data by the KOV/KUB-Gas technical team. It is on trend with the main Olgovskoye producing area and appears to extend the known boundaries of the Olgovskoye Field. The O-12 well is expected to be tied-in for commercial production later in Q4 2011 after a pipeline has been constructed and the necessary production permits have been received.

Seismic & Drilling Programs

A 3D seismic program covering approximately 180 km2 over the Olgovskoye and Makeevskoye license areas finished field operations in June 2011. Processing and interpretation of the acquired data completed during the third quarter defined a number of potential locations for further development on both licenses. Most notably, it illustrated a potential areal extent of approximately 6 km2 for the new gas zone discovered by the M-19 well and defined two new locations, one at Makeevskoye-21 ("M-21") to further develop the gas zone discovered by the M-19 well, and a second at Makeevskoye-16 ("M-16"), for further development of gas production from elsewhere on the Makeevskoye license. The M-19 well commenced production in July 2011 at an initial rate of more than 5 MMcf/d as of July 26, 2011 and was producing 4.8 MMcf/d as of September 30, 2011.

During the second quarter, KUB-Gas acquired 71 kilometers of new 2D seismic data over the North Makeevskoye license. Interpretation of this new data and interpretation of approximately 275 kilometers of pre-existing 2D seismic data has defined North Makeevskoye-1 ("NM-1") as the first drilling location on this new license.

KUB-Gas will continue to develop additional gas production with an active drilling program. The drilling rig has been moved to the Olgovskoye-18 ("O-18") location and the O-18 well, with a planned TD of 2,300 meters, will commence drilling in the next few days. Following the drilling of O-18, KUB-Gas plans to drill the NM-1, M-21, M-16 and Krutogorovskoye-5 wells during the balance of Q4 2011 and into Q1 2012.

KUB-Gas owns a 100% interest in the Olgovskoye, Makeevskoye, North Makeevskoye, Krutogorovskoye and Vergunskoye licenses in the Lugansk area of Ukraine.

Tim Elliott, President and Chief Executive Officer of KOV commented, "The results of the O-12 well, together with the substantial increases in gas production during the past 15 months, confirm the potential of our Ukrainian assets. KUB-Gas is proving to be an excellent investment for our Company and we are pleased that the potential for growth in reserves and production, first identified by the Company prior to the acquisition in June 2010, is being realized."

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