REG - Enwell Energy PLC - Quarterly Operations Update

Enwell EnergyAnnouncement

10/10/2023 07:00

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RNS Number : 4830P  Enwell Energy PLC  10 October 2023

10 October 2023

 

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
in respect of its Mekhediviska-Golotvshinska ("MEX-GOL"), Svyrydivske ("SV")
and Vasyschevskoye ("VAS") gas and condensate fields and
Svystunivsko-Chervonolutskyi ("SC") exploration licence.

 

Production - Q3 2023

 

The average daily production of gas, condensate and LPG from the MEX-GOL, SV
and VAS fields over the period from 1 July 2023 to 30 September 2023 was as
follows:

 

 Field             Gas               Condensate        LPG               Aggregate

                   (MMcf/d)          (bbl/d)           (bbl/d)           boepd
                   Q3 2023  Q3 2022  Q3 2023  Q3 2022  Q3 2023  Q3 2022  Q3 2023  Q3 2022

 MEX-GOL & SV      9.4      10.9     358      453      323      297      2,248    2,588
 VAS               -        -        -        -        -        -        -        -
 Total             9.4      10.9     358      453      323      297      2,248    2,588

 

The ongoing war in Ukraine continues to cause disruption to operations at the
Company's fields and recent adverse regulatory actions by the Ukrainian
authorities, culminating in suspension of the VAS and SC licences on 4 May
2023, have caused further severe disruption to the Company's operations and a
loss of production from the VAS field. Production volumes at the MEX-GOL and
SV fields were lower when compared with Q3 2022 due to natural field decline,
with the exception of LPG recoveries, which improved significantly following
the completion of upgrade works to the gas processing facilities at the fields
in mid-2022.

 

Operations

 

Production operations are continuing at the MEX-GOL and SV fields, and,
currently, the production rate is approximately 2,200 boepd. Field operations
are currently continuing relatively normally, but there have been disruptions
to the supply of equipment and fuel, as well as interruptions to the supply of
electricity, which has caused delays to the progress of some activities. In
general, the operating environment in Ukraine remains very challenging.

 

The GOL-107 well is a development well, targeting production from the V-20 and
V-23 horizons in the Visean formation. The well was spudded in December 2022
and has been drilled to a final depth of 5,190 metres. One interval, at a
drilled depth of 5,140 - 5,143 metres, within the V-23 horizon, has been
perforated and demonstrated gas flows. Initial testing of the well, using a
variety of choke sizes, will now be undertaken to determine the productivity
of the well, and thereafter it is intended that the well will be hooked up to
the gas processing facilities to allow production testing to be conducted to
establish the operating parameters of the well. Further information on the
outcome of the testing of this well will be announced in due course.

 

At the VAS field and SC exploration licence area, all operations are suspended
following suspension orders made by the State Geologic and Subsoil Survey of
Ukraine (the "SGSS") on 4 May 2023.

 

The Company continues to be cautious and vigilant in continuing with its
operations and is taking the appropriate 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.

 

Cash Holdings

 

At 30 September 2023, the Company's cash resources were approximately $72.9
million, comprised of $51.4 million equivalent in Ukrainian Hryvnia and the
balance of $21.5 million equivalent in a combination of US Dollars, Pounds
Sterling and Euros.

 

Gas Sales and Sales Receivables

 

During Q3 2023, demand for gas in Ukraine has remained weak due to the war,
although gas sale prices improved moderately during the quarter. In Q2 2023,
the Company completed a restructure of its contractual relationships relating
to the sale of its gas, and pursuant to such restructuring, ceased selling gas
to LLC Smart Energy. The Company now sells all of its gas directly to its
off-takers. During the quarter, all of the remaining receivable balance under
the previous sale arrangement with LLC Smart Energy was received.

 

New Auditor and Suspension from trading on AIM Market

 

The Company is pleased to announce that it has recently engaged Zenith Audit
Ltd as its new auditor for the audit of its financial statements. Zenith Audit
Ltd has commenced work on the audit of the Company's financial statements for
the year ended 31 December 2022 (the "2022 Accounts"), in conjunction with
Kreston Ukraine who are undertaking the Ukrainian component of the audit of
such financial statements. Completion of the 2022 Accounts is expected to be
in Q4 2023.

 

Prior to the appointment of Zenith Audit Ltd, the Company did not have an
auditor to enable it to complete, publish and post its audited 2022 Accounts
to shareholders by the deadline of 30 June 2023 as required by Rule 19 of the
AIM Rules for Companies. As a result, trading in the Company's ordinary shares
on AIM was suspended with effect from 7.30 a.m. on 3 July 2023 pending
publication and posting to shareholders of the 2022 Accounts. Suspension from
trading is expected to be lifted upon publication and posting to shareholders
of the 2022 Accounts, and the Company's interim results for the six month
period ended 30 June 2023, which are expected to be completed shortly after
the publication of the 2022 Accounts.

 

Suspension of VAS and SC Licences

 

As announced on 4 May 2023, the SGSS has issued orders suspending the
Company's VAS production licence and SC exploration licence.

 

This followed action by the Ministry of Justice of Ukraine (the "MoJ") on 2
May 2023, which made Orders (the "MoJ Orders") cancelling the registration
entry made on behalf of three Ukrainian subsidiaries of the Company named LLC
Prom-Enerho Produkt ("PEP"), LLC Arkona Gas-Energy ("Arkona") and LLC Well
Investum ("Well Investum") respectively in the Unified State Register of Legal
Entities, Individuals-entrepreneurs and Civil Institutions of Ukraine (the
"State Register") relating to the ultimate beneficial owners of such
companies. The registration entry for each of these companies stated the
ultimate beneficial owners to be the beneficial owners of the indirect
majority shareholder of the Company as notified to the Company and published
to the market on 26 January 2023, but the MoJ Orders removed each such
registration entry and restored the previous entry in the State Register,
Vadym Novynskyi ("Mr Novynskyi"). As announced on 26 January 2023, the Company
was notified that Mr Novynskyi ceased holding a beneficial interest in the
indirect majority shareholder of the Company on 1 December 2022. PEP holds the
VAS production licence, Arkona holds the SC exploration licence and Well
Investum is a dormant company.

 

Under Ukrainian Law No. 2805-IX, which came into force on 28 March 2023, the
SGSS has legislative powers to suspend and/or revoke hydrocarbon licences of
which the ultimate beneficial owner is the subject of Ukrainian Government
sanctions. As announced on 9 December 2022, the Ukrainian Government imposed
sanctions on Mr Novynskyi, who previously held a major indirect shareholding
interest in the Company, but ceased to do so on 1 December 2022 as referred to
above. However, following the issuance of the MoJ Orders, Mr Novynskyi is now
registered in the State Register as the ultimate beneficial owner of each of
PEP and Arkona, and is consequently recognised by the SGSS as the ultimate
beneficial owner of each of the VAS production licence and SC exploration
licence. As a result, the SGSS issued the suspension orders in respect of each
of the VAS production licence and SC exploration licence for a period of 5
years effective from 4 May 2023. Accordingly, the Company has ceased all field
and production operations on the VAS and SC licence areas.

 

Regulatory Actions by Ukrainian Authorities

 

As announced on 12 April 2023, the Ukrainian authorities have taken a number
of regulatory actions against certain of the Company's subsidiaries in
Ukraine, including conducting a search at the Group's Yakhnyky office, from
where the MEX-GOL and SV fields are operated, and placing certain physical
assets of the Ukrainian branch (representative) office of Regal Petroleum
Corporation Limited ("RPC") and Arkona (which respectively hold the MEX-GOL
and SV fields and the SC exploration licence) under seizure, thereby
restricting any actions that would change registration of the property rights
relating to such assets. However, the use of such assets is not restricted and
therefore the Company is able to continue to operate and produce gas and
condensate from the MEX-GOL and SV fields. In addition, the MoJ made an Order
cancelling the registration entry made on behalf of a subsidiary of the
Company named LLC Regal Petroleum Corporation (Ukraine) Limited in the State
Register relating to the ultimate beneficial owners of such company, thereby
restoring the previous entry in the State Register, Mr Novynskyi.
Furthermore, the SGSS issued an Order to RPC requiring that additional
information be provided and/or violations be eliminated in the disclosures
relating to the ultimate beneficial owners of the MEX-GOL and SV licences
respectively.

 

Sergii Glazunov, Chief Executive Officer, said: "The operating environment in
Ukraine continues to be extremely challenging as a result of the war, and
additionally the regulatory actions and continuing suspension orders made by
the Ukrainian authorities are extremely disappointing. Nevertheless, we are
pleased to be able to continue our production operations at the MEX-GOL and SV
fields, and to progress the testing of the GOL-107 well. We are consulting
with our lawyers to take all available measures to protect our assets and
business and to, hopefully, successfully challenge the regulatory actions
taken by the Ukrainian authorities."

 

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 by virtue of
the Market Abuse (Amendment) (EU Exit) Regulations 2019.

 

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

 Zeus Capital Limited                           Tel: 020 7614 5900
 Alexandra Campbell-Harris (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
 LPG     liquefied petroleum gas
 MMcf/d  million cubic feet per day
 %       per cent.
 $       US Dollars

 

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