REG - Petroneft Resources - 2016/2017 Work programme <Origin Href="QuoteRef">PTR.I</Origin>

Petroneft ResourcesAnnouncement

21/03/2016 11:33

RNS Number : 6707S
Petroneft Resources PLC
21 March 2016
PetroNeft Resources plc ('PetroNeft' or 'the Company')
2016/2017 Work programme and budget agreed with Oil India
PetroNeft (AIM: PTR) an oil & gas exploration and production company operating in the Tomsk Oblast, Russian Federation, and 50% owner and operator ofLicences61 and 67 is pleased announce that it has reached agreement with Oil India, its partner on license 61, for a budget and major work programme for 2016 and 2017.
This work programme is expected to require gross funding of at least US$35 million. Oil India have indicated to the Company their willingness to provide 100 per cent. of this funding by way of a shareholder loan to the joint venture company on favourable terms. Principal repayments by the joint venture on the proposed loan will not commence until 2019. The legal documentation for the first tranche of this proposed financing is currently being finalised and Shareholders will be updated once that is complete. This is a significant accomplishment for PetroNeft in the current market as it would otherwise be extremely challenging, expensive and dilutive to Shareholders for PetroNeft to raise the required funding for its share of these costs.
However, Oil India has indicated that this funding will only be made available conditional on the current management team remaining in place. Furthermore, should there be a change in management subsequent to the drawdown of the new loan this would constitute an event of default, requiring immediate repayment of amounts advanced and further requiring PetroNeft to provide its 50% share of this funding.
The major points of this work programme are as follows:
2016
South Arbuzovskoye Development Plan
 One vertical and up to 3 horizontal wells
 Pad 2 construction has been completed and construction of the pipeline and power line to Pad 1 is in progress
 Production drilling rig is being moved to location with drilling and production to commence in Q2
Sibkrayevskoye Delineation and Optimization Studies
 Additional delineation well (S-374) at Sibkrayevskoye to better define south-eastern portion of the field
 S-374 drilling pad is under construction and the drilling rig is being moved to location
 Optimisation studies and approvals for Sibkrayevskoye Development
2017
Sibkrayevskoye Development Plan
 Development of Pad 1 with up to 7 vertical/slant wells and 6 horizontal wells
 Construction of 26 km pipeline and power line from Pad 1 to Lineynoye central processing facilities Q1
 Commencement of development drilling and production Q2
The economics for these developments are very good even in the current low oil price environment.
Current operations
The workover programme for Tungolskoye and Arbuzovskoye is currently in progress. The Sibkrayevskoye No. 373 well was put on long term test using an electric submersible pump and has consistently achieved a rate of over 200 bopd. Licence 61 is currently producing about 2,400 bopd (gross) and PetroNeft is debt free.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented:
"The agreement of a work programme and budget is a major step forward for the development of License 61. Given the challenges currently being experienced in the market, the ability to secure this funding is a major positive for the Company. We are delighted to be continuing our partnership with Oil India. 
Our most recent drilling campaign has laid the groundwork for this, potentially transformative 2016 / 2017 drilling schedule. At Sibkrayevskoye, the S-373 well and extensive new seismic data acquired at Sibkrayevskoye in 2015 indicate that the field could ultimately be in the 100 million bbl range which would be one of the largest oil fields discovered in the Tomsk Region in the last 25 years."
For further information, contact:
Dennis Francis, CEO, PetroNeft Resources plc 
+1 713 988 2500
Paul Dowling, CFO, PetroNeft Resources plc 
+353 1 647 0280
John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker) 
+353 1 679 6363
Henry Fitzgerald-O'Connor, Canaccord Genuity Limited (Joint Broker)
+44 207 523 8000
Martin Jackson/Shabnam Bashir, Citigate Dewe Rogerson
+44 207 638 9571
Joe Heron / Douglas Keatinge, Murray Consultants
+353 1 498 0300
The information contained in this announcement has been reviewed and verified by Mr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for the purposes of the Guidance Note for Mining and Oil & Gas Companies issued by the London Stock Exchange in June 2009. Mr. Francis holds a B.S. Degree in Geophysical Engineering and a M.S. Degree in Geology from the Colorado School of Mines. He has also graduated from the Harvard University Program for Management Development. He is a member of the American Association of Petroleum Geologists and the Society of Exploration Geophysicists. He has over 40 years' experience in oil and gas exploration and development.
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