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REG - Caspian Sunrise plc - Operational and impact of Russian sanctions update

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RNS Number : 6858N  Caspian Sunrise plc  06 June 2022

Caspian Sunrise PLC

Operational and impact of Russian sanctions update

 

Introduction

The Board of Caspian Sunrise PLC ("Caspian Sunrise" or the "Company") is
pleased to report the spudding of Deep Well 802 and to provide its assessment
of the ongoing impact of Russian sanctions.

 

Deep Well 802

Deep Well 802 is the second deep well to be drilled on the Yelemes Deep
structure and the sixth deep well in total to be drilled at the BNG Contact
Area.  It is also the final deep well the Group is obliged to drill to fulfil
the BNG work programme commitments.

 

The well has an Total Depth of 5,200 meters targeting oil in the easier to
drill Sandstone rather Carboniferous rock, with an initial target at 4,300
meters, and with drilling expected to take 4 months. By using our own rig,
with the casing already acquired and by drilling through the easier sandstone,
the cash costs are expected to be significantly lower than for previous deep
wells.

 

The well is being drilled close the site of a Soviet era blowout and our
advisers have provided us with the highest estimate of success for any of our
BNG deep wells drilled to date.

 

Assessment of the ongoing impact of Russian sanctions

We are now into the fourth month of Russian sanctions and we have received
several requests to set out in greater detail how these sanctions have
affected us to date and our expectations for the future.

 

Our oil is Kazakh oil not Russian oil, even though at present they are both
termed Urals Oil. It is only an accident of geography that the current
delivery mechanism takes it through Russia. We sell in Kazakhstan to
international oil traders, who can then sell anywhere in the world. We expect
the Kazakh government shortly to rename the oil produced in Kazakhstan to
differentiate it from oil produced in Russia.

 

To date there we have had no problems in accessing the Russian pipeline
network to deliver our international oil and we do not believe there will be
any issues in this respect no matter how long sanctions continue. Whatever
happens we do not see these pipelines being closed.

 

Our oil enters the Kazakh pipeline network close to BNG and typically emerges
at a Russian port on the Baltic Sea.  An alternative destination would be to
a Russian port in the north of the that country. From these ports the oil is
transferred to large tankers for delivery anywhere in the world.

 

The main impact to date has been the discount at which our oil, termed Urals
Oil trades in the market. Recently the discount to Brent has been $30-35 per
barrel, which represents a significant loss in revenue.

 

What we believe will happen is that this discount is likely to reduce as the
natural market arbitrage take effect.

 

We expect the buyers who have not signed up to boycott Russian oil including
China, India and other large Asian economies to take advantage of the current
discount for Urals Oil and switch their buying to this cheaper oil and reduce
the oil they buy from other more expensive sources.

 

In summary, we do not expect the current large discounts continuing at current
levels going forward. Renaming Kazakh produced oil will also help
differentiate it from Russian oil.

 

 

Caspian Sunrise PLC

 

Clive Carver

Executive
Chairman
+7 727 375 0202

 

WH Ireland, Nominated Adviser & Broker

 

James
Joyce
+44 (0) 207 220 1666

Andrew de Andrade

 

Qualified person

 

Mr. Assylbek Umbetov, a member Association of Petroleum Engineers, has
reviewed and approved the technical disclosures in this announcement.

 

This announcement has been posted to:

www.caspiansunrise.com/investors (http://www.caspiansunrise.com/investors)

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information
is disclosed in accordance with the Company's obligations under Article 17 of
the UK MAR. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.

 

 

 

 

 

 

 

 

 

 

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