REG - Enwell Energy PLC - Quarterly Operations Update

Enwell EnergyAnnouncement

11/10/2022 07:00

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RNS Number : 4007C  Enwell Energy PLC  11 October 2022

11 October 2022

 

Enwell Energy plc
("Enwell" or the "Company")

 

Quarterly Operations Update

 

Enwell Energy plc (AIM: ENW), the AIM-quoted oil and gas exploration and
production group, provides an update on its operational activities in Ukraine,
where it operates the Mekhediviska-Golotvshinska (MEX-GOL), Svyrydivske (SV)
and Vasyschevskoye (VAS) gas and condensate fields, as well as the
Svystunivsko-Chervonolutskyi (SC) exploration licence.

 

Production - Q3 2022

 

The average daily production of gas, condensate and LPG from the MEX-GOL, SV
and VAS fields over the period from 1 July 2022 to 30 September 2022 was as
follows:-

 

 Field             Gas               Condensate        LPG               Aggregate

                   (MMcf/d)          (bbl/d)           (bbl/d)           boepd
                   Q3 2022  Q3 2021  Q3 2022  Q3 2021  Q3 2022  Q3 2021  Q3 2022  Q3 2021

 MEX-GOL & SV      10.9     21.0     453      749      297      278      2,588    4,645
 VAS               -        2.5      -        24       -        -        -        481
 Total             10.9     23.5     453      773      297      278      2,588    5,126

 

The disruption to production operations at the MEX-GOL and SV fields, where
certain remedial and maintenance work was delayed and/or disrupted, and the
shut-in of the VAS field since February 2022 meant that production volumes
were materially lower when compared with Q3 2021. In addition, the drilling of
new wells and some remedial work on existing wells has been deferred or
suspended until there is an improvement in the operating environment in
Ukraine.

 

Operations

 

Production operations are continuing at the MEX-GOL and SV fields, and,
currently, the production rate is approximately 2,700 boepd. Some other field
operations have resumed, including workover operations on the SV-2 well and
maintenance of field infrastructure, but all other works have been deferred or
suspended.

 

At the MEX-GOL and SV fields, the SV-31 development well, which was completed
in May 2022 and brought on production from one interval, at a drilled depth of
5,210 - 5,219 metres, within the V-22 Visean formation, has continued to
produce strongly. In September 2022, pursuant to the plans for this well, two
additional intervals, at drilled depths of 5,187 - 5,189 and 5,120 - 5,123
metres, respectively within the V-22 and V-21 Visean formations, were
perforated to access additional reserves. These additional intervals have also
proved productive and materially boosted production rates from this well,
which are currently approximately 3.36 MMscf/d of gas and 161 bbl/d of
condensate (785 boepd in aggregate).

 

On the SC licence area, after a period of suspension, drilling operations
resumed at the SC-4 well in July 2022 and the well was drilled to its final
depth of 5,585 metres. The well is primarily an appraisal well, targeting
production from the V-22 horizon, as well as exploring the V-16 and V-21
horizons, in the Visean formation. Currently, testing operations are underway
at the well. In addition, the interpretation of the 150 km(2) of 3D seismic,
that was acquired last winter, is nearing completion.

 

At the VAS field, after being suspended since February 2022, production
operations have resumed this month, and, currently, the production wells at
the field are cleaning up after the period of suspension.

 

The Company continues to be cautious and vigilant in continuing these
operations and is taking all measures available to protect and safeguard its
personnel and business. The safety and wellbeing of its personnel and
contractors is paramount and the Company will continue to take all possible
steps to ensure their safety.

 

Subsoil Production and Excise Tax Changes

 

With effect from 1 March 2022, the Ukrainian Government enacted changes to the
subsoil production tax rates applicable to gas production by modifying the
applicable rates based on gas prices, extending the incentive rates for new
wells for a further 10 years and making improvements to the regulatory
environment. The legislation which introduced these changes also included
provisions that these rates would not be increased for 10 years. Further
details are set out in the Company's announcement dated 13 April 2022.

 

However, as a direct result of the conflict in Ukraine, including the
significant decline in domestic consumption disrupting the previous supply,
demand and pricing dynamics, there has been a divergence between domestic and
European gas pricing, and accordingly, the methodology (linked to European
prices) used to determine the reference gas price for the new subsoil tax
rates has had a significantly detrimental effect for domestic gas producers.
In order to address this issue, the Ukrainian Parliament has recently enacted
new legislation which modifies such methodology to ensure that it operates as
originally intended (with such reference price being aligned with domestic
prices). This modification has an effective date of 1 August 2022.

 

In addition, the excise tax on LPG sales was suspended between 24 February
2022 and 30 September 2022, but has now been reinstated, while the VAT rate
applicable to condensate and LPG sales was reduced to 7% (from 20%) with
effect from 18 March 2022.

 

Cash Holdings

 

At 30 September 2022, the Company's cash resources were approximately $78.6
million, comprised of $20.9 million equivalent in Ukrainian Hryvnia and the
balance of $57.7 million equivalent in a combination of US Dollars, Pounds
Sterling and Euros .

 

VAS Licence Order for Suspension

 

The Company does not have any further information to report in relation to the
Order for suspension relating to the production licence for the VAS field
since the announcements made on 12 March 2019 and 19 March 2019 respectively,
other than to report that the legal proceedings issued in the Ukrainian Courts
to challenge the validity of the Order are ongoing, and the Company remains
confident that it will ultimately be successful in such legal proceedings.

 

Sergii Glazunov, Chief Executive Officer, said: "Although the situation in
Ukraine continues to be extremely challenging, we are pleased that, with the
recent resumption of production operations at the VAS field, we now have
active operational activity at all of our assets, and we also look forward to
the results of the recently completed SC-4 well in due course"

 

This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014, which forms part of United Kingdom domestic law by
virtue of the European Union (Withdrawal) Act 2018, as amended.

 

For further information, please contact:

 

 Enwell Energy plc                                 Tel: 020 3427 3550
 Chris Hopkinson, Chairman
 Sergii Glazunov, Chief Executive Officer
 Bruce Burrows, Finance Director

 Strand Hanson Limited                             Tel: 020 7409 3494
 Rory Murphy / Matthew Chandler

 Arden Partners plc                                Tel: 020 7614 5900
 Ruari McGirr / Elliot Mustoe (Corporate Finance)
 Simon Johnson (Corporate Broking)

 Citigate Dewe Rogerson                            Tel: 020 7638 9571
 Ellen Wilton

 

Dr Gehrig Schultz, BSc Geophysical Engineering, PhD Geophysics, Member of the
European Association of Geophysical Engineers, Member of the Executive
Coordinating Committee of the Continental European Energy Council, and a
Non-Executive Director of the Company, has reviewed and approved the technical
information contained within this announcement in his capacity as a qualified
person, as required under the AIM Rules for Companies.

 

 Definitions

 bbl/d   barrels per day
 boepd   barrels of oil equivalent per day
 cf      cubic feet measured at 20 degrees Celsius and one atmosphere
 km(2)   square kilometre
 LPG     liquefied petroleum gas
 Mm(3)   thousand cubic metres
 MMcf/d  million cubic feet per day
 %       per cent.
 $       US Dollars

 

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