Kulczyk Successfully Tests O-18 Well in Ukraine

Kulczyk Oil Ventures is pleased to report that testing of one of the indicated gas zones in the Olgovskoye-18 ("O-18") well in Ukraine has yielded a maximum rate of 1.187 million cubic feet per day ("MMcf/d") of natural gas through a 5 mm choke. 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 in the first quarter of 2012.

Olgovskoye-18

The O-18 well reached a planned depth of 2,300 metres on 4 November 2011. Following analysis of data gathered during drilling it was decided to deepen the well to total depth ("TD") of 2,650 metres, after which the well was cased to TD as a potential gas producer. The well was designed to test gas-bearing reservoirs of Muscovian and Bashkirian age and to further develop the gas production capability of the Olgovskoye Field. Interpretation of wireline logs indicated up to 38.5 metres of gas pay in 7 zones and one of these, the R22 zone, was selected for testing. The R22 zone, which had not previously been production in the Olgovskoye license area, was perforated from 2,035.7 to 2,058.7 metres and flowed for a period of 12 hours prior to being shut-in for pressure build-up.

Jock Graham, KOV Executive Vice President, commented: "O-18 has been another success for the Company in Ukraine. We continue to be pleased with our operational and technical achievements in that country. We are drilling quicker, safer and more efficiently and our production level has increased more rapidly than we anticipated when we acquired our 70% interest in KUB-Gas in June 2010. The Ukraine assets continue to exceed our expectations and, in addition, we have several high impact wells coming up, including the M-21 well, which could make a material difference to the scale of the upside."

Average gross production during the month of November 2011 from the KUB-Gas properties was 11.8 MMcf/d of natural gas (8.3 MMcf/d net to KOV) and 119 barrels per day of condensate. Additional producible volumes have already been tested after the recent fracture stimulation of the O-6 and O-8 wells and the testing of the O-12 gas discovery well. These wells, which tested an aggregate maximum rate of 11.4 MMcf/d of gas, are expected to commence regular production at different times over the next 3 months. Good production practice dictates that the wells are produced at lower rates to avoid damage to the reservoir and, accordingly, the O-6, O-8 and O-12 wells are expected to add cumulative new production volumes of between 5 and 8 MMcf/d (3.5 to 5.6 MMcf/d net to KOV) when they are tied-in.

The drilling rig is being moved to a new location at Makeevskoye-21 ("M-21") which has a planned TD of 2,176 metres. The M-21 well is located approximately 900 metres northwest of the M-19 gas discovery well which commenced production in late July 2011 at a rate of 5.5 MMcf/d. It is expected to spud in the second half of December and to reach TD approximately 30 days after the spud date.
 

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