PetroNeft (AIM: PTR) an oil & gas exploration and production company, operating in the Tomsk Oblast, Russian Federation, and 90% owner and operator of Licence 67 and 50% owner and operator of Licence 61, is pleased to announce the following operational update for Licence 67.
o Completion of the Cheremshanskoye road ahead of schedule and within budget.
o Good performance from the C-4 well. The well is flowing naturally at approximately 300 bopd without any decline and over 16,000 bbls of oil has been produced to date.
o Workover rig mobilized to the L-2a well on Ledovoye field, initial results expected by the end of Q2.
Construction of the 6.5 km road connecting the C-4 well on the Cheremshanskoye field to the nearest all season road has been completed ahead of schedule and within budget. The road is already being used to export oil from the C-4 well and, in addition, is enabling personnel and equipment to be mobilized into and out of the field all year round without the need for more expensive helicopter transportation, thereby further reducing operational costs.
The C-4 well has been producing oil flowing naturally since 17th of February. Initially the well was producing through a 2 mm choke size. It has been steadily increased to the current 8 mm choke size on 7th of March. Since this time the production has increased to approximately 300 bopd and is showing no signs of decline. In total over 16,000 bbls of oil (over 2,100 tons) have been produced and sold.
The oil has been sold at competitive rates under the offtake contract with the local refinery at the well head, thereby removing any pipeline costs and improving the margins.
The value of the oil produced from the Cheremshanskoye field is enhanced by the partial exemption in the Mineral Extraction Tax (MET) which in February was equivalent to $3.4/bbl and for March is estimated to be $4.2/bbl.
Due to the strong performance of the well we are looking at options to further increase production from the well.
The Cheremshanskoye field reserves are 19.26 mmbbls C1+C2 which were approved by GKZ (Russian State Reserves Committee) January 2019.
The Company is finalising its preparations to re-enter the L-2a well on the Ledovoye field. The L-2a well lies along the northern margin of the licence and immediately south of the North Ledovoye field in the adjacent Licence 55, which has historically been operated by MOL. A workover rig has been mobilised to the L-2a well andoperations will start imminently with initial results expected by the end of Q2.
This L-2a well was drilled by the Company in 2011 and was designed to twin the successful L-2 well which was drilled in 1973 and flowed oil to surface during a short open hole test recovering 34.5 bbls of oil in 40 minutes, equivalent to more than 1,000 bopd. The L-2 well suffered from operational problems before a cased hole test could be run.
At the time of drilling of the L-2a well (2011), 5 m of net oil pay was identified within the Upper Jurassic J1-1 and J1-2 reservoir intervals. The well flowed 8.3 m3/day (52 bopd) on a small 3 mm choke, but did not have a cased hole test, this being a requirement for reserves to be approved by GKZ (Russian State Reserves Committee) and for development of the field.
The forward plan is to re-enter the well, run a liner, and then perform a cased hole test on both the Upper Jurassic J1-1 and J1-2 reservoir intervals. If successful, the plan is to carry out a 3-month extended test. Any produced oil during this three month test will be sold. This data will then be used to gain GKZ approval of the reserves which then will enable the Company to evaluate options to commence development of this field. The close proximity to an all season road (200 m) will enhance development economics through lower costs.
David Sturt, CEO PetroNeft commented:
"We are very pleased to be able to report continued operational success following on from our rigorous review and utilization of all available opportunities combined with a highly dedicated operational team in our Tomsk office.
The success at Cheremshanskoye will provide a basis for a year-round production boost and the favorable tax position means that this additional production will deliver excellent returns.
It is also very exciting to be moving forward with the L-2a well re-entry. Previous wells have proven up oil in this field and we now need to focus on executing the re-entry to further increase reserves, production and revenue. Our strategy for this well is in line with our approach of using local expertise to deliver relatively low risk wells which will add immediate value in terms of production and reserves while using the minimum of capital."