TIDMUEN
RNS Number : 2721D
Urals Energy Public Company Limited
21 March 2011
21 March 2011
Urals Energy Public Company Limited
('Urals Energy' or the 'Company')
Operational update
Highlights
-- Active start to the year with a clear strategic focus on
increasing production from existing assets
-- Updated Petrosaskh drilling strategy, designed to maximize
field potential
-- Ready to spud Well#51 by end of March
-- Arcticneft performance review is underway in order to
increase production
-- Assessment of previously suspended wells underway
-- Intellectual Drilling Services appointed for geological and
drilling services at both Petrosaskh and Arcticneft
Petrosakh
Current production at Petrosakh is 1,422 BOPD. Recent flow rate
tests on the sidetrack well 35b have confirmed that the reservoir
has the potential for a production increase. In response to this
new data, and with a strengthened balance sheet following the
successful private placement conducted in December 2010, the
decision has been made to drill more vertical wells into the same
area, in addition to sidetracks from already proven wells on the
field.
In order to capture the full potential of the Petrosakh field,
the vertical well will consist of a larger diameter and are
expected by the Board to achieve better flow rates than the
previously envisaged drilling programme would have achieved. In
particular, the updated strategy entails drilling two new vertical
wells and four sidetracks. The Company is currently looking at the
different development options of both sidetrack and vertical wells,
to determine which will better increase production.
Since the beginning of the year, the Company has modernized the
ARB-100 drilling rig. The improved rig is expected to substantially
decrease drilling time and reduce risks associated with drilling.
In addition, all the necessary preparations of the pad site for
drilling the first vertical well #51 have been finalised, and the
rig is now in position and is being assembled.
In addition, the Company has signed supply contracts, paid and
taken delivery of drilling pipes, casings and chemicals which are
now positioned for drilling the first two vertical wells.
As the first two wells will be vertical, the decision has been
made to not use an independent drilling contractor, given that
Petrosakh has all the required drilling expertise in-house.
However, geological studies will be conducted and directional
drilling supervised and performed by a well-known and experienced
company, Intellectual Drilling Services, for both Petrosakh and
Arcticneft. In the past this contractor has operated in all
UEN-owned fields.
Downstream
Petrosakh continues to refine and sell 100% of its crude oil
production. Demand for fuel oil and diesel has exceeded the current
supply, however demand for gasoline is subject to seasonality and
is low in winter. As a result, we have accumulated 5,000 tons
(about 38,000 bbls) of gasoline, which will be sold during the
Spring-Summer season.
Following an increase in world oil prices and subsequent excise
tax in Russia, prices for oil products in Sakhalin have also
increased. Average prices for January-February 2011, net of VAT and
excise tax for diesel, increased by 20% compared with average 2010
prices. Average prices for gasoline in January - February 2011, net
of VAT and excise tax, did not change from the average 2010 prices.
Taking into account seasonal demand for gasoline is low; this shows
an increase in gasoline prices by at least 15%.
Offshore licence
The offshore exploration license at Petrosakh expired in
February 2011. As was previously reported, after confirming a lack
of interest from potential farm-out partners, the management
decided not to apply for an extension due to substantial capital
expenditure requirements and the high risk of the exploration
programme
Arcticneft
Current production at Arcticneft stands at 726 BOPD. As of 21
March 2011 crude oil in stock was 83,187 bbls.
As previously reported, the Company was planning to divest
Arcticneft and focus on its East Siberian assets. Consequently, it
did not concentrate on increasing production and development at
Arcticneft. Thus, in 2006 water flooding was stopped which led to
the production declining rapidly. Since this time, the decline in
production has leveled off and production has stabilized at the
current levels.
Last year the Company engaged a respected oil industry institute
to review the current well performance and recommence water
injection, in order to increase production from the existing wells.
These recommendations have now been implemented.
In 2011 the Company not only plans to increase production from
the existing wells, but also to drill new wells following the
approval of the field development plan by State Central Development
Committee. This approval process is in progress. Drilling is
scheduled for the second half of the year, since delivery of the
required materials to Arcticneft can be made only during the open
navigation period, which starts in June.
The Company is recommencing waterflood performance monitoring
via regular fluid level measurements, pressure buildup testing in
the wells and monitoring of the producing gas-oil ratio. This work
will facilitate accurate assessment of bottom-hole conditions,
permeability, productivity and any impediments to productivity such
as the "skin factor". This in turn will allow the Company to assess
the need for remedial measures, such as acid stimulation, as a way
of restoring optimum productivity in the wells.
In addition, interference testing will be conducted, in order to
determine the level of connectivity between producers and injectors
where such questions arise. The institute has issued its
recommendations regarding the optimum composition of acid, which
will now be tested on select wells in June - July 2011, after
navigation opens and required chemicals can be delivered to the
field. Once the composition of acid fluid is confirmed, similar
measures will be applied on all wells of the field.
Concurrently, the Company is reviewing approximately 16 wells
which have previously been suspended. Depending on the results of
this review, the most promising wells will be reactivated.
Corporate
There has been increased interest in the Russian media to a
potential alleged sale of the Company's former assets, Dulisma and
Taas, by their present owners. The Company is closely monitoring
this situation, having in mind the possible payback of an existing
outstanding loan to Taas in the event of a successful deal
closure.
Alexei Maximov, CEO of Urals Energy, commented as follows:
'We have had an active start to the year, focusing on developing
our existing portfolio and increasing production from these fields.
Based upon new data, this has included updating our strategy at
Petrosakh, leaving us better positioned to best capture the field's
potential. As part of this campaign, we are now close to spudding
Well#51. Meanwhile good progress is being made at Arcticneft which
includes increasing production and in identifying suspended wells
to bring back into production."
Enquiries:
Urals Energy Public Company Limited +7 495 795 03 00
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Alexei Maximov
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Grigory Kazakov
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Allenby Capital Limited +44 (0)20 3328 5656
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Nick Naylor
Alex Price
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Pelham Bell Pottinger +44 (0)20 7861 3232
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Mark Antelme
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Jenny Renton
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This information is provided by RNS
The company news service from the London Stock Exchange
END
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