PetroNeft Resources plc (LON:PTR) an oil & gas exploration and production company, operating in the Tomsk Oblast, Russian Federation; and 90% owner and operator of Licences 67 and 50% owner and operator of Licence 61, has provided the following update.
Highlights
· Reservoir Stimulation program on the Lineynoye and Arbuzovskoye fields (Licence 61) expanded from five to seven wells.
· Drilling tender for Cheremshanskoye field drilling (Licence 67) of up to five new wells awarded to OJSC SSK.
· Oil sales and forward finance contract for Cheremshanskoye production extended for an additional year.
Licence 61
On the 12th of November 2021, the Company announced it had signed a contract with NewTech Well Services LLC for a five well reservoir stimulation program to be carried out during Q1 2022.
After further technical analysis and discussions with NewTech, we are pleased to announce that the program has been expanded from five to seven wells, of which six will be on the Lineynoye field and one on the Arbuzovskoye field. The two additional wells added to the program are the two best producing wells at the Lineynoye field.
The expected increase in overall production from the seven well program is between 350 and 650 bopd. The successful reservoir stimulation of L-115 well (Lineynoye field) last year, and outstanding results from the S-373 well (Sibkrayevskoye field), provided crucial technical information which has enabled us to expand the program with confidence.
Licence 67
PetroNeft Resources has completed a tender for the provision of drilling services at the Cheremshanskoye field. The tender is now closed and awarded to SSK. The program covered by the tender is for the drilling of up to five wells which will be a combination of vertical and horizontal development wells from the northern pad on the Cheremshanskoye field, adjacent to the currently producing C-4 well.
SSK have considerable experience of drilling operations in the Tomsk region including the successful drilling of the C-4 well in 2018. As well as providing the most commercially attractive bid, they were also selected for their technical and operational excellence. Now that the tender process is complete, we are negotiating and finalising the drilling contract.
In December 2020, an Offtake Contract was signed with the Alexandrovskoye Refinery (‘AOR’) for the purchase of oil produced from the Cheremshanskoye field (C-4 well). This was a very positive development for PetroNeft, providing competitive pricing at the wellhead, thereby maximising returns on production. The contract was for an initial 12 month period which has now been extended for a further year.
The original contract included a forward financing provision for up to $1M to cover the costs of constructing the 6.2 km all-season road, linking the C-4 well in the west to the all-season road running close to the eastern margin of the field. This financing option was not used due to the strong performance from the C-4 well, enabling the road to be paid for out of free cash flow. Whilst the road is now complete, the forward financing option has been retained within the contract extension, further enhancing our financial flexibility as we plan for expanded operations in the year ahead.
David Sturt, CEO PetroNeft Resources commented:
“We are very pleased to continue to report operational progress across our producing portfolio. At Licence 61 thanks to the excellent technical work by our team in Tomsk, combined with the strong performance from the two wells stimulated in 2021, we have been able to expand our reservoir stimulation program to seven wells – a significant increase on last year’s two-well program. If successful, this has the potential to result in a significant increase in production and therefore to deliver meaningful returns to the business.
At the Cheremshanskoye field, we are delighted to be working with an experienced drilling contractor with successful experience of both working in Tomsk and with PTR. The tender process has also demonstrated the benefit of having all season access to the field enabling us to optimize the timing for operational activities without the normal seasonal constraints so common within this region which has led to more competitive pricing
We look forward to keeping shareholders informed as our operational program ramps up through the year”
