Huarong Optimisitc About Operations at its Kyrgyzstan Project
China Huarong Energy Company Limited (Huarong Energy, the Company or We, and together with its subsidiaries, the Group) announced Thursday that the fracturing operations of oil wells in the Kyrgyzstan Project have achieved satisfactory results. As of July 21, an aggregate daily production volume of the Kyrgyzstan Project has reached approximately 1,464 barrels. New oil layers were discovered in the newly developed Chigirchik oilfield zone with considerable production test results achieved from an appraisal well in the zone.
The significant increase of oil production volume of the Kyrgyzstan Project demonstrated its reserve abundance and relatively high accessibility of oils, which enables us to achieve greater return with reasonable development cost, and create greater value for our shareholders. As of July 21, an aggregate daily production volume of approximately 1,464 barrels of oil was recorded from 23 oil wells with production, which was mainly attributable to a significant increase of production volume of both new wells and old wells after conducting fracturing operations. Since the completion of the acquisition of the Kyrgyzstan Project in September 2014, the drilling work of 46 new wells and the workover operation of 19 old wells have been completed.
As new batches of fracturing sand will be delivered to production sites soon, the Group will proactively prepare for fracturing operations and the commencement of production of the existing drilled wells, and accelerate the pace of new well development in order to realize the development potential of the Kyrgyzstan Project. Following considerable volume of oil recorded during the production test, oil well M656 (located in Maili-Su IV oilfield zone) is scheduled to commence production by the end of July.
Newly Discovered Oil Layers in Chigirchik
Our 60 percent-owned indirect subsidiary Kyrgyzjer Neftegaz Limited Liability Company (the Project Company) has commenced exploration and development of the Chigirchik oilfield zone of the Kyrgyzstan Project and is currently exploring both deep and shallow strata of that zone. We are optimistic toward the prospect of crude oil production in the Chigirchik oilfield zone in view of its newly discovered oil layers.
On June 26, oil pipe conveying perforation has been conducted in the newly discovered oil layer of oil well Chigirchik 9, which is the first appraisal well located in the Chigirchik oilfield zone. The oil well started flowing after perforation. On July 21, Chigirchik 9 recorded a stable daily production test volume of approximately 250 barrels during the production test when using 0.11 imnch (3 millimeter) oil choke. We are encouraged by the considerable volume of oil of Chigirchik 9 during the production test and remained optimistic about the prospect of crude oil production in the Chigirchik oilfield zone.
Since the two oilfield zones (namely, Chigirchik and Changyrtash) of the Kyrgyzstan Project were not covered by the Reserve Report dated July 20 issued by an independent competent evaluator, we are pleased and optimistic to the overall production prospect of the Kyrgyzstan Project.
Reserve Report of Evaluated Zones
APEX Reservoir Service, Inc., an independent competent evaluator, has issued a petroleum reserve report dated July 20 for the three oilfield zones (namely, Maili-Su IV, Eastern Izbaskent and Izbaskent) in the Kyrgyzstan Oilfield Project. The Reserve Report was performed and prepared in accordance with the Petroleum Resources Management System (PRMS) with a base date of evaluation of May 31 (the Base Date of Evaluation). Its findings include:
- as at the Base Date of Evaluation, the proved (1P) recoverable reserves of the Evaluated Zones in the Kyrgyzstan Project were approximately 24.39 million tons, whereas the proved plus probable (2P) recoverable reserves were approximately 50.54 million tons. The reserves were composed mainly of light crude oil.
- as at the Base Date of Evaluation, the proved (1P) geological reserves of the Evaluated Zones in the Kyrgyzstan Project were approximately 144.46 million tons, whereas the proved plus probable (2P) geological reserves were approximately 194.48 million tons. The reserves were composed mainly of light crude oil.
- as at the Base Date of Evaluation, the post-tax net present value of the petroleum reserves of the Evaluated Zones (calculated with an annual discount rate of 10 percent) shared by the Project Company was approximately $1.925 billion.
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