REG - Enwell Energy PLC - Ukraine Update

Enwell EnergyAnnouncement

13/01/2022 07:05

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RNS Number : 2807Y  Enwell Energy PLC  13 January 2022

13 January 2022

 

Enwell Energy plc

("Enwell" or the "Company")

 

Ukraine 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 - Q4 2021

 

The average daily production of gas, condensate and LPG from the MEX-GOL, SV
and VAS fields for the period from 1 October 2021 to 31 December 2021 was as
follows:-

 

 Field              Gas               Condensate        LPG               Aggregate

                    (MMcf/d)          (bbl/d)           (bbl/d)           boepd
                    Q4 2021  Q4 2020  Q4 2021  Q4 2020  Q4 2021  Q4 2020  Q4 2021  Q4 2020

                    15.3     17.4     588      614      295      309      3,501    3,908

 MEX-GOL & SV

                    2.4      2.7      24       29       -        -        463      536

 VAS

                    17.7     20.1     612      643      295      309      3,964    4,444

 Total

 

Overall production volumes in Q4 2021 were lower, both compared with Q4 2020
and the previous quarter, predominantly as a result of the shut-in of the SV-2
and MEX-109 wells during the quarter, after these wells suffered water ingress
(see announcement dated 29 November 2021). While the shut-in of these wells
has had a material impact on overall production rates in the quarter, remedial
work on these wells is ongoing, as outlined below, in order to seek to restore
production from these wells.

 

The significant increase in European gas prices in the quarter has fed through
to Ukrainian gas prices, which has benefited the sales prices being achieved
by the Company for its gas, as well as condensate and LPG. These continued
high hydrocarbons sales prices have helped to offset the impact on revenues
during the quarter due to the lower production volumes.

 

Production - Full Year 2021

 

The average daily production of gas, condensate and LPG from the MEX-GOL, SV
and VAS fields for the year ended 31 December 2021 was as follows:-

 

 Field              Gas           Condensate      LPG           Aggregate

                    (MMcf/d)      (bbl/d)         (bbl/d)       boepd
                    2021   2020   2021    2020    2021   2020   2021   2020

                    18.9   17.6   681     641     308    295    4,237  3,960

 MEX-GOL & SV

                    2.6    2.9    26      32      -      -      493    581

 VAS

                    21.5   20.5   707     673     308    295    4,730  4,541

 Total

 

Overall production volumes for the full year 2021 increased by approximately
4.2% compared with the 2020 year.

 

Operations

 

At the SV field, testing operations on the SV-29 development well were delayed
for a period due to local shortages of materials required in the operations,
but supplies have now improved and work on initial testing of the well has
resumed. The well was spudded in February 2021 and drilled to a final depth of
5,450 metres. The primary target of the well was the V-22 reservoir within the
Visean formation, and to date, one interval within this reservoir, at a
drilled depth of 5,246 - 5,249 metres, has been perforated. Testing of this
interval was undertaken using a variety of choke sizes, and initial results
showed gas flows and an unexpectedly high, but somewhat variable, proportion
of condensate. The higher than anticipated condensate rates from this interval
required that a longer period of initial testing be conducted. However, a
mechanical issue connected to the perforating of the well caused a further
delay, but this issue has now been rectified. It is now intended to perforate
and test a further interval, at a drilled depth of 5,228 - 5,232 metres, in
the V-22 reservoir. Thereafter, the well output will be run through the gas
processing facilities to allow longer-term production testing to be conducted
in order to optimise the operating parameters of the well.

 

Drilling of the SV-31 well is ongoing, with the well having reached a depth of
approximately 5,100 metres. This well was spudded in September 2021, and has a
target depth of 5,250 metres. The well is a development well, targeting
production from the V-21 and V-22 reservoirs in the Visean formation, which
have demonstrated good productivity in an existing nearby well. Drilling
operations are scheduled to be completed by the end of the first quarter of
2022, and, subject to successful testing, production hook-up is scheduled
during the second quarter of 2022.

 

The workover operations on the SV-2 well are progressing satisfactorily, with
the removal of the existing production string nearly completed. It is then
planned to install a new production string, and to lift the well using coiled
tubing. This well is operated under a joint venture agreement with PJSC
Ukrnafta, the majority State-owned oil and gas producer, pursuant to which the
gas and condensate produced is sold under an equal net profit sharing
arrangement between the Company and PJSC Ukrnafta.

 

At the MEX field, the workover operations on the MEX-109 well are also
continuing, and after logging identified the source of the water ingress,
remedial work was undertaken to seal the water ingress. The well is currently
under observation and further operations to attempt to remove the remaining
water in the well are planned.

 

Construction work on the upgrades to the gas processing facilities at the
MEX-GOL and SV fields is progressing well and remains on schedule. In total,
the upgrade works are scheduled to take approximately three and a half
months to complete. These works involve an upgrade of the LPG extraction
circuit, an increase to the flow capacity of the facilities, and a significant
increase to the liquids tank storage capacity, which are designed to improve
overall plant efficiencies, improve the quality of liquids produced and boost
recoveries of LPG, while reducing environmental emissions.

 

At the SC licence, drilling of the SC-4 well is continuing, with the well
having reached a depth of approximately 5,260 metres. This well was spudded in
August 2021, and has a target depth of 5,565 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. Drilling
operations are scheduled to be completed in Q2 2022.

 

Also at the SC licence, the acquisition of 150 km(2) of 3D seismic is
progressing well and is expected to be completed by the end of January 2022.
Processing and interpretation of the acquired seismic data will then be
undertaken.

 

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.

 

Cash Holdings

 

At 31 December 2021, the Company's cash resources were approximately $92.5
million, comprised of $29.0 million equivalent in Ukrainian Hryvnia and the
balance of $63.5 million equivalent in a combination of US Dollars, Pounds
Sterling and Euros. The cash resources have been significantly boosted by the
high hydrocarbon prices achieved during the quarter, despite the lower
production volumes.

 

COVID-19 Pandemic

 

The Group continues to monitor the situation relating to the COVID-19
pandemic, and to take any steps necessary to protect its staff and operations.
However, as of the date hereof, there has been no operational disruption
linked to the COVID-19 pandemic, and no material impact is currently envisaged
on the Group's prospects.  Nevertheless, the Group remains acutely aware of
the risks, and is taking action to mitigate them where possible, with the
safety of individuals and communities continuing to be the priority.

 

Sergii Glazunov, Chief Executive Officer, said: "Although we have continued to
generate strong revenues and benefit from the high prevailing gas prices, the
water ingress issues with the SV-2 and MEX-109 wells have been frustrating, as
have the supply constraints experienced in Ukraine. However, we are now making
progress with the remedial work being undertaken on these wells, as well as
with the testing of the SV-29 well, and look forward to making further
progress in the near future. We are also pleased with the good progress we are
making in the drilling of the SV-31 and SC-4 wells, the acquisition of 3D
seismic at the SC licence and the construction works at the MEX-GOL and SV gas
processing facilities."

 

 

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

 

Dmitry Sazonenko, MSc Geology, MSc Petroleum Engineering, Member of AAPG, SPE
and EAGE, Director of the Company, has reviewed and approved the technical
information contained within this press release in his capacity as a qualified
person, as required under the AIM Rules.

 

 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
 MMcf/d  million cubic feet per day
 %       per cent
 $       US Dollars

 

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